A definitive technical reversal on the charts, hints that the German central bank won’t be quick enough to provide stimulus and that would seem to leave a deflationary view in place. With initial weakness in global equitiespushing many measures into fresh downside breakouts, we suspect that money will flee from the Euro and that aquick return to and below critical support of 1.26 will be seen. To add insult to injury, the Press is carrying storiesthis morning that the German government is poised to reduce its growth forecast and since that comes in thewake of an IMF downgrade, we can’t argue against an eventual return to the early October lows down around1.2514.
Technical Outlook: Stochastics are at mid-range but trending higher, which should reinforce a move higherif resistance levels are taken out. The market’s close above the 9-day moving average suggests the short-termtrend remains positive. The daily closing price reversal down is a negative indicator for prices. It is a slightlynegative indicator that the close was under the swing pivot. The near-term upside target is at 128.4125. The nextarea of resistance is around 127.5650 and 128.4125, while 1st support hits today at 126.2750 and below there at125.8325.