FOREX TRADING

EURUSD

Maintains weak tone from 1.3691/77 top area. Market is trending lower to challenge 1.3300, key trendline support connecting 1.3266/1.3282 lows. Break here would complete a medium-term bear flag for significant move lower. Only regain of 1.3448/1.3520 firms the short-term outlook.

Res: 1.3422, 1.3448, 1.3501, 1.3520
Sup: 1.3356, 1.3340, 1.3300, 1.3280

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This Week’s Market Outlook

Highlights

• Currency markets to remain beholden to the risk trade
• Bullion’s bull-run still intact
• Sterling takes a hammering, focus on 3Q GDP and public finances
• Key data and events to watch next week

Currency markets to remain beholden to the risk trade

The moves this week should convince anyone that had any doubt, that the correlation between equity markets and currencies remains alive and well. It was a rollercoaster, with EUR/USD oscillating between 1.4800 support and 1.5000 resistance for the better part of the week. The S&P 500 meanwhile continued to find interest on either side of the pivotal 1100 level. It seems that EUR/USD 1.50 and the S&P 1100 go hand in hand as both remain extremely challenging technical and psychological levels. Indeed, both have only closed above those crucial levels three times this year – euro in October and stocks just this week. It should not surprise anyone that the correlation between these two since the beginning of the second half of 2009 has been a stellar 92%. Don’t look for much to change on this front anytime soon.

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