Last week ended on a strong bullish note for risky assets, following a bounce in Germany's business confidence indicator, a ceasefire in the Israel/Hamas conflict and markets again busy re-pricing in aid to Greece being approved today. Monday trading in Asia, has so far kept the enthusiasm intact, with the EUR/USD holding its firm tone above the 1.2950 mark.
Over the weekend, while not being a market mover, the sovereignty plan from Catalan's ruling CiU president Artur Mas received a serious setback on Sunday's Catalan election, and despite the fact that the CiU obtained the most votes, the results were far worse than the undisguised aim of reaching an absolute majority. The lost seats fell short of the strong ties they were aiming at to manage the process of independence. Nonetheless, the two most voted for political forces are still supporting the region's sovereignty dream.
Today's market headlines will be almost entirely dominated by the EU FinMin meeting, with reports over the weekend suggesting a Greece debt deal is still up in the air. On Saturday, finance ministers held a teleconference, which failed to clear up the picture in this regard. The Greek-based paper Kathimerini, citing sources familiar with the talks, suggests an agreement may not be inked until December 3, while portals like Reuters sound more optimistic.
On the U.S. fiscal threat, U.S. lawmakers have been unable to make much progress since Obama won re-election almost 3 weeks ago. The positions still appear too far apart before a compromise can be reached, Dick Durbin, the No. 2 Senate Democrat, told ABC's "This Week" program, according to Reuters. "Unfortunately, for the last 10 days, with the House and Congress gone for the Thanksgiving recess ... much progress hasn't been made," Mr. Durbin said.
EUR/USD aided by risk sentiment, Greece deal expectations; positive bias
According to Valeria Bednarik, in-house chief technical analyst, the EUR/USD shows a constructive outlook after regaining the 1.2950 area, 61.8% retracement of the latest daily fall from 1.3170 to 1.2660. However, the analyst warns that since Greek positive news are almost all priced into the euro, "surges above 1.30/31 will be likely seen as good selling opportunities over the next few days."
Meanwhile, the Toronto based TD Securities FX Research Team, notes EUR/USD "is back on a bullish track," as the pair is "trading well through the 40- and 200-day MA benchmarks again, further EUR gains are likely." In case of retracing, "we look for strong support now on dips to the low/mid 1.29s and for the market to push up to the 1.31 area," the team suggests.
Marc Chandler, Global Head of Currency Strategy at BBH also is of the opinion that constructive technical outlook put the odds in favor of a higher EUR/USD. As Mr. Chandler notes, "technical indicators, like RSI and MACDs, are constructive and the 5-day moving average crossed above the 20-day average at the end of last week, suggesting short-term models and momentum traders are getting positive signals."
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