On Monday strong ISM manufacturing data gave Wall Street stocks the thrust which is required for significant growth in the beginning of the month. Yesterday’s European session positive atmosphere and highs and lows gave a tinge of optimism for the markets.
This atmosphere remains full of the expectations about upcoming events in Spain. Rajoy's government keeps markets on edge, denying any help. Political news coverage again tries to hide the worst scenario: If Spain refuses help it will not be able to pay external debts. However, this situation is framed in these twists and turns without much sense that has become the European financial landscape where words and lack of accurate information have the power.
The only important data in the atmosphere of confusion predominating over old Europe was released by the Reserve Bank of Australia which had cut its interest rate to 3.25% from 3.5%. There were some signals for such actions during last month’s minutes. The reduction resulted in a sharp drop in Aussie on all fronts which reached almost 1-month minimum against the dollar. At the moment, the currency is regaining positions very slightly.
The euro, which is already in the area of 1.2930, is seeking to overcome this strong resistance that is always over price for that value, and if successful, will head during the American session towards 1.2960, showing the next important target. If it overcomes this level it will be back to 1.30.
The pound is still bearish. 4-hour chart shows the British currency recovery, but this figure can indicate a continuation of downtrend, with the target level at 1.6060.
Meanwhile, the yen experiences some difficulties. The Bank of Japan announced that it could take action on the foreign exchange market in case the currency continues to be appreciated against the dollar. It will not be surprisingly if the USD/JPY pair comes close to 80.00 in the coming days.
Currently, it is the most important news. The bags operate at profit, and the same is expected from Dow Jones recovery. Employment data and monetary policy are going to be published soon; flat for now.