At a glance: Cling together, swing together
The European sovereign debt crisis opened a new chapter yesterday with the ECB’s decision to launch an unlimited bond buying program. This happened against the strong opposition of the German people and is most likely not strengthening their willingness to intensify the political union of Europe. The latter however looks to be the key for the long-term survival of the EUR. That said the market reaction was equally mixed as the implications of this decision as risk markets clearly welcomed the shortterm relief while EUR/USD remained choppy. This leaves the latter in a vulnerable setup and the short-term trigger for a stronger sell-off at 1.2502/00 (last intra-day low/minor 38.2 %) at risk. If the positively inspired risk market would however manage to extend its gains beyond an upward sloping converging triangle (usually a reliable topping pattern!) in the weekly chart of the S & P 500 at 1447, then the chances of EUR/USD breaking above key-resistance between 1.2749/69 (last top/daily trend channel) and 1.2840/56 (200 DMA/daily trend) would also rise significantly. In terms of EUR/Crosses we are also still missing the final evidence for a game change on bigger scale as internal 38.2 % retracement’s at 100.67 in EUR/JPY, at 0.8011 in EUR/GBP, at 1.2555 in EUR/AUD and at 7.4034 in EUR/NOK are still capping the upside so far. Cable faces almost a bigger problem in technical terms as the very negative implications of a huge triangle formation, which has formed since 2009, remain fully intact as long as 1.6032/58 (daily trend channel/int. 76.4 %) is not broken decisively. It however takes a break below 1.5825/03 (last intra-day low/hourly trend) to pull the trigger.
Click here to read the full report: Technical Research
J.P.Morgan