The early Asian move through 1.3600 was promoted by news reports that Federal Reserve Vice Chairman Janet Yellen will be nominated to head the central bank upon the retirement of Ben Bernanke at the end of January. Ms Yellen is a proponent of the easy money, unemployment focused policies of Mr. Bernanke and is expected to continue the quantitative easing program at the current $85 billion a month.
Today was the fourth attempt to break through 1.3600, (fifth if you count Monday’s 1.3591 top). The brief penetration to 1.3605 and the quick reverse and descent to 1.3580 and the inability to approach the prior highs of 1.3646 and 1.3632 indicates the technical barriers are, at least for the time, insurmountable.
After consolidating around 1.3565 for several hours after the fling at 1.3605, there was a sharp drop to 1.3455, a consolidation there followed by another sharp decline to 1.3525.
The better than expected German industrial production caused but a brief nine point pop but then the gradual decline resumed. The pattern of trading has been constant throughout the day. A period of consolidation during which the selling is steady but not overwhelming, but no new buying emerges, and then a sharp fall after the existing bids are filled. This happened at 1.3565, 1.3555, 1.3525 and 1.3515.
There is considerable buying at 1.3500 which should take some time to be absorbed, but beneath that there is only weak support at 1.3455, the low on September 25th and the high on August 20th, and at1.3425, the top on August 21st.
A general weakness for the euro is the September 18th run from 1.3394 to 1.3486 in the thirty minutes after the Fed’s surprise quantitative easing announcement. Such a rapid run higher leaves very little orders or strong support and resistance levels in its wake. If the euro reaches 1.3490 there is likely to be little substantive support until 1.3400.
Chief Market Strategist
WorldWideMarkets Online Trading