EURUSD in temporary limbo

Too early to tell whether that was it for the bear squeeze, but EURUSD failed to hold a minor new high today in the wake of the Barroso speech. 1.3550 is a tactical focus if the bears want to tactically regain the upper hand.

Odds and ends
Some ugly confidence numbers out of Sweden. While the manufacturing confidence was steady (though still at a negative level), consumer confidence plummeted and the economic tendency survey was also very weak, with both of the latter two at their worst levels since 2009. The Swedish krona is back in the range against the Euro after the recent risk meltdown saw It make and attempt at new 10-month high before the sell-off eased.

US durable goods orders data out of the US were subdued. There have been very few swings in the ex Transportation data series for several months now, an usual state of affairs for this normally volatile data series. On the bright side, the core “Capital goods non-defense ex Aircraft” measure saw a strong rebound, even from heavily upward revised July data. The question going forward is the degree to which durable goods orders will slow after the end of the year due to the hefty writedown incentives provided by the Obama administration that expire at the end of this year.

Dovish utterances from the BoE’s Miles today in an interview with The Times newspaper as he indicated he was leaning more toward voting in favor of more asset purchases today, though his mind was still “finely balanced”. This and Barroso’s speech to help drive EURGBP higher, but the pair then moved back just below the 200-day moving average (around 0.8710) again by the time of this writing. 0.8650 looks like an important level if the pair heads lower.

Chart: EURGBP
Interesting to see EURGBP so rangebound when we have such important outstanding questions about the Euro. But both currencies are quite weak as the BoE is clearly leaning toward more quantitative easing. The pair are in the vice grip of a range at the moment, with 0.8650 the first interesting are of support to the downside, followed by the recent 0.8530 area low.



Looking ahead
The Euro rally on the “strength” of EU commission president Barroso has so proved choppy, as we suggested this morning it might not last long, though it is too early to tell as of this writing, as 1.3595 minor support and bigger support down at 1.3550 are still in place after we surprisingly rallied all the way to new local highs earlier in the day.  The risk appetite side of the equation is an important one from hour to hour as well. Regarding Barroso’s speech: again, the assumption is that it will be very difficult to get Germany on board Barroso’s “stability bond” train and that yet another chapter of the extend-and-pretend saga is a more likely route to be taken. On that note, the SPV solution appears more likely, the question being whether the EU’s shenanigans have become so desperate that the market refuses to play ball without a better quality solution.

As for the financial transaction tax – Britain will never go for it and large European banks would look to start pulling up as many stakes as they can in order to take their operations abroad before the eventual implementation date, assuming legislation is ever passed. There’s something not right about Barroso upbraiding the banks for bad behavior when a significant reason EU banks are in trouble is due to their massive sovereign debt holdings – which under strain because of poor political leadership.

Watch out for the SNB’s Jordan set to speak in basel at 1615 GMT today – this could get CHF crosses to sit up and pay attention. Less importantly, watch out for Bernanke out enlightening a Cleveland, Ohio audience on “Lessons from emerging market economies on the sources of sustained growth”. Hmmm.