Closed in NY at $1.2685 after rate’s late rally had extended to a high of $1.2730 as market reacted to a press report suggesting that
Germany had agreed to the Eurozone bailout fund buying debt. Later denials from German officials eased rate back to the $1.2680/85 area. Rate initially edged to $1.2690 into early Asia before turning lower, squeezing down to $1.2662 as risk-on was pared back, while equity markets remained fairly flat. The G20 Communique provided little market response as was seen close to the leaked version seen earlier Tuesday. Main focus remains on tonight’s FOMC with market hopes for some kind of Fed balance sheet expansion, though QE3 not widely expected some extension in Operation Twist has been suggested, though market seen open to disappointment. However, Bernanke press conference later may soften the blow by lowering inflation and output forecasts. Recovery so far has met resistance on approach to $1.2690 ($1.2688 38.2% $1.2730-1.2662), a break to open a move toward $1.2705/15 ahead of a retest on that $1.2730 level. Support in the area between $1.2660/40.
EasyForexNews Research Team