With EUR/USD pushing up to the top-end of the range on Friday, the pair opened relatively flat in Asia before sellers emerged with a raft of euro-negative headlines.
The price action continues to frustrate both the bulls and the bears as the pair struggling to sustain breaks above 1.45, although each sell-off is met with insatiable demand from sovereign and macro funds. We are looking closely at a pivot resistance of 1.4540 and onto 1.4580, which could attract sellers in the near-term. However, we don’t expect these levels to be under any huge threat though today, given that London is on a bank holiday tonight.
The talk during Asian trade was centred around an article written in the Telegraph (UK publication), which suggested that German Chancellor Angela Merkel no longer has enough coalition votes in the upper house (Bundestag) to vote through the revamped $440 billion European rescue fund (EFSF). The next meeting is not scheduled until October 14, so this could weigh on markets as the long-winded process will only add to confusion. Newly elected President of the IMF Christine Lagarde also caused a stir amongst European officials over the weekend, by saying that the global financial system is on thin ice and vulnerable to the slightest shocks; comments which were quickly rebuffed by European officials.
With negative news surrounding Greece and the new debt swap plan, it is amazing to see the euro hold up as well as it is. However, this may well be down to reports driven by the Sunday Times (UK), which suggested that European officials are working on a ‘radical’ plan for banks, which may include guarantees over certain types of debts issued. With the European banks struggling to access credit at present, this could be an interesting development; however it is early days, and unclear how this will play out.