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ForexLive US wrap: Solid US data offset by record European yields

|Includes: Invesco CurrencyShares Euro Trust ETF (FXE), FXF, UUP
  • US retail sales rise 0.5% in October, ex-autos up 0.6%; firmer than expected
  • Empire State Manufacturing Index rises 0.6 in November from -8.5; stronger than expected
  • PPI falls 0.3% m/m in in October; core flat
  • US business inventories flat in September
  • Fed Evan’s says his stance that more stimulus needed is unusual on the FOMC; Says ignoring improved econ data as has been disappointed so many times before; expects economy to stay soft and unemployment high; rates may have to stay low beyond mid-2013
  • European bond spreads close at record wides: France 190 bp over bunds, Belgium 312 bp, Austria 180 bp, Spain 463 over bunds, Italy at 548 bp over
  • ECB’s Mersch: ECB will not allow European debts to be inflated away
  • EU’ Barroso says to make proposal for deeper economic union next week
  • Italy PM-to-be Monti to announce cabinet tomorrow
  • French FinMin: Can meet budget targets if economy grows just 0.5% in 2012; ECB a key element in answering debt crisis
  • Nowotny: Moody’s visit to Austria long-planned, routine
  • S&P 500 rises 0.5% to 1258
  • US 10-yr note unchanged at 2.05%
  • WTI closes at $99.41 up $1.27; gold unchanged at $1781

EUR/USD managed to push through the lows set in Europe at 1.3515 and fall as low as 1.3496 as Europe closed up shop for the day. Record high bond yields across Europe were the catalyst for the slide, but prices soon bounced as the lows set last week at 1.3484 held fast. We bounced to 1.3557 in light afternoon trade on short-covering. We end the session on a soft note, around 1.3530.

The one bit of good news, though widely expected, were signs from Italian PM Monti that he has been able to form a cabinet. The Official announcement should come around midday in Europe on Wednesday.

Resistance is seen overnight at 1.3575/80. Stops are seen just above that level. Should we break and hold 1.3580, expect a broader rally as tech will sense we’ve put in a double bottom in the 1.3485/95 area.