Weak start of the week for euro, selling off across the board in thin markets with Tokyo closed and the U.S. ahead also closed for Columbus Day, which drys liquidity up and thus in case of moves volatility turns higher as matches are harder to find. EUR/USD has recently broken below psychological 1.30 round level, EUR/AUD below 1.28, and EUR/JPY around 102.
Local share markets are not making any better, with China trading for first time since closing the whole of last week for holidays, with Shanghai lower by -0.75%, Hang-Seng -0.49%, and Kospi -0.93%, all lead by SP500 futures at session lows. Gold is also lower for the start of the week by -0.5% from previous weekly close Friday, last at $1772 off session lows at $1766 near past week's lows at $1764, following a fresh 11-month high Friday at $1796, previous better than expected U.S. NFP data.
As Sean Lee, founder at FXWW, noted: "There is little point in trying to analyse the U.S. jobs data in order to explain FX market moves," the analyst said, adding: "it's all about positioning and the main move last week was a reduction in EUR shorts and a move out of AUD longs." Open interest in EC future contracts as of past Tuesday as reported by CFTC has dropped to lowest level in a year, with net short positions held by speculators falling to a 1-year low from record highs by early June.
World Bank cuts China GDP's forecast
Good HSBC PMI services data from China did not helped the risk takers case much, even though still showed expansion with a 54.3 figure for September, higher than previous one from June at 52.0. Instead, Hong-Kong's September PMI fell to 49.6 from 50.5 in August, and World Bank cut 2012 GDP forecast for China to +7.7% from earlier +8.2%. Australia's job adds, both internet and newspaper showed a negative result for sixth consecutive month, which coupled with RBA rate cut expectations and gloomy outlook coming from latest RBA minutes did not helped the risk takers case either.
In another geopolitical news Venezuela's Chavez wins Presidential Vote, while it's been fifth consecutive day so far Turkey keeps retaliating against attacks coming from northern Syria, adding to the growing tensions in the area, a key strategical zone for oil pipelines coming into Europe.
Long week ahead for European leaders
Even though economic agenda looks soft for Europe this Monday with only Trade balance, Current Account and Industrial production for Germany while the U.S. will be closed for holiday along with Canada, the political agenda starts growing which could bring interesting headlines any time which coupled with the low liquidity could cause very choppy market action.
The EU presidency 2 day summit starts today, along with the Eurogroup meeting in Luxembourg. The Federal Reserve and the ECB will hold a 3-day conference on "Bank funding - Markets, instruments and implication for Corporate lending and the Real economy", while head of the European commission's task force for Greece Mr. Reichenback speaks on Greece at "think tank" at the Centre of European Studies.
For the nearest term on EUR/USD, "Below the 1.3000 mark," says Chief Analyst at Fxstreet.com Valeria Bednarik, "short term sellers may attempt to send price lower, with 1.2970 as next strong support; once below this last bears will lead the way for the day," the analyst concludes. The pair trades last at 1.2990 off fresh session lows at 1.2983.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.