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Hopes for Euro Resolution Diminish- Dollar Climbs as Sentiment Turns

Hopes for Euro Resolution Diminish- Dollar Climbs as Sentiment Turns

2011-10-20 16:43:00
Michael Boutros, Technical Strategist
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Daily Winners and Losers

Hopes_for_Euro_Resolution_Diminish-_Dollar_Climbs_as_Sentiment_Turns_body_Picture_2.png, Hopes for Euro Resolution Diminish- Dollar Climbs as Sentiment TurnsHopes_for_Euro_Resolution_Diminish-_Dollar_Climbs_as_Sentiment_Turns_body_Picture_3.png, Hopes for Euro Resolution Diminish- Dollar Climbs as Sentiment TurnsHopes_for_Euro_Resolution_Diminish-_Dollar_Climbs_as_Sentiment_Turns_body_Picture_4.png, Hopes for Euro Resolution Diminish- Dollar Climbs as Sentiment Turns

The Swiss franc is the top performer against a stronger dollar mid-day in New York, with the USD/CHF pair off by more than 0.39% early in the session. As we noted in yesterday’s Winners/Losers Report, the franc is likely to push higher as the currency climbs on haven flows. And with concerns of further SNB intervention easing, the pair may look to move lower as the EUR/CHF exchange rate seeks to re-test the 1.21-price floor put in place by the central Bank.

The pair broke below lower-bound support of the ascending channel before rebounding off the 38.2% Fibonacci extension taken from the October 7th and overnight crests at 0.8930. Interim support rests here with subsequent floors seen at the 50% Extension at 0.8885 and the 61.8% extension at 0.8840. The swissie may come under pressure as the dollar pares some of the sharp declines seen in past session, with risk appetite continuing to taper off through the Asian and European trading sessions. Topside resistance on the pair holds with former trendline support, now resistance, backed by 0.9020 and 0.9080.

Key Levels/Indicators

Level/Indicator

Level

100-Day SMA

0.8391

50-Day SMA

0.8612

20-Day SMA

0.9054

2011 CHF High

0.7079

Hopes_for_Euro_Resolution_Diminish-_Dollar_Climbs_as_Sentiment_Turns_body_Picture_5.png, Hopes for Euro Resolution Diminish- Dollar Climbs as Sentiment TurnsHopes_for_Euro_Resolution_Diminish-_Dollar_Climbs_as_Sentiment_Turns_body_Picture_6.png, Hopes for Euro Resolution Diminish- Dollar Climbs as Sentiment Turns

The euro saw a surge in volatility today with the single currency sinking nearly 0.70% early in the session. Slightly stronger than expected US data was quickly dismissed after newswires reported that German Chancellor Angela Merkel had cancelled a government statement on a proposal regarding the expansion of the EFSF bailout fund. Markets were widely expecting a resolution of some sort this weekend when the European Union summit meets in France. The delay is likely to fuel speculation that official have been unable to agree on new strict guidelines for the expanded rescue fund and continues to weigh on broader market into the close of North American trade.

The single currency saw a test of trendline resistance at 1.3840 before plummeting nearly 100 pips to the 76.4% short-term Fibonacci extension taken from the October 17th and 19th crests at 1.3670. A break below this level eyes subsequent floors at 1.3650 and the 100% Fibonacci extension at 1.3610. This level is paramount for the euro with a break below risking substantial losses with stronger support eyed at the 1.35-figure. Topside resistance holds at the key 61.8% Fibonacci extension at the 1.37-handle, backed by the 50% extension at 1.3740 and the 38.2% extension at 1.3770. A break above trendline resistance at 1.3840 sees targets at the 1.3870 mark. Overnight traders will be eyeing economic data out of Germany with the October IFO sentiment surveys and the Euro zone Government Debt-GDP ratio on tap.

Key Levels/Indicators

Level/Indicator

Level

100-Day SMA

1.4106

50-Day SMA

1.3890

20-Day SMA

1.3575

2011 EUR High

1.4939

Upcoming Events

Date

GMT

Release

Expected

Previous

10/21

7:40

ECB President Jean-Claude Trichet Speaks on Euro Economy

-

-

10/21

8:00

ECB's Juergen Stark Speaks on European Economy

-

-

10/21

8:00

German IFO - Expectations (OCT)

97.0

98.0

10/21

8:00

German IFO - Business Climate (OCT)

106.2

107.5

10/21

8:00

German IFO - Current Assessment (OCT)

116.4

117.9

10/21

9:00

Euro-Zone Government Debt-GDP Ratio (JUL 2)

-

85.1%

To contact Michael emailmboutros@dailyfx.comor follow him on Twitter @MBForex.

To be added to Michael’s email distribution list, send an email with subject line “Distribution List” to mboutros@dailyfx.com

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