Italian PM Monti says wouldn’t mind if Italian banks tapped ECB funds to buy Italian bonds
The mentality of the market is that this is right. Central bank gives banks money at 1% or less and they buy Italian Bonds and earn the spread. The danger with such mentality is it promotes bubbles and takes the element of risk out of the equation. People buy because it is risk free. Much the same way house buying was risk free.
The US, UK, ECB flood banks with money, they buy bonds, interest rates come down and they hope for a recovery to happen. What if it does not (i.e.,the equivalent of house prices not going up)? What happens if they spur on a massive recovery and they have to unwind the trillions of dollars on their balance sheets and ignite inflation in the process which is out of control? What happens if the money goes into commodities and leads to multiple bubbles?
When too much money is sloshing around it encourages bad behavior. The focus is not on risk but solely on reward. Focus should be on risk first, then reward.
EURUSD moves above the 38.2% of the move down from October
The 38.2% of the move down from the October high to the low in January comes in at the 1.32429 level. Thehigh at the end of January stalled at 1.3226. Today, the level was breached and the price has since moved above the 38.2% retracement at the 1.32429 level. A close above this level will be eyed. If it can close above, traders will be looking toward the 100 day MA at the 1.3336 level (currently).
GBPUSD breaks above the February high and triggers stops
The GBPUSD has broken to new highs for February and looks toward key resistance at the 50% Fibonacci Retracement of the move down from the August 2011 high. That level comes in at the 1.5924 level. This is the next target for the pair. Not far above that level is the key 200 day MA at the 1.5937 level. I would expect that the market finds willing profit taking sellers against these levels.
USDJPY tests topside trendline target
EURUSD moves above 1.3026 high.
Looking for momentum to keep the bulls in charge. The 1.32235 is the next hurdle followed by 1.3260. The 1.3206 and 1.3200 are support levels off trend lines in the chart above.
EURUSD looks to test the 9 day high
The EURUSD is moving closer and closer to the 9 day high at the 1.3226 level. Traders who are long will likely sell against the level but a move above should not be faded. The price has been in a 201 pip trading range for the last 9 days of trading.
The price has been buoyed by the apparent agreement within the Greek coalition. This will free up 130 billion tranche from the EU/IMF which will allow for the interest payment due in March. Support at eh 1.3176-84 level now.
USDJPY finds sellers against retracement level
The USDJPY tested the 38.2% of the move down from the January 24th high to the low reached on February 1st. That level comes in at the 76.879 level. The high today reached 76.85 and has backed off. The next support level comes in at the trendline at the 76.65 level. Below that the 200 hour MA at the 76.55 level is the next target. The pair was supported today on the official word that the BOJ did in fact intervene in the market (13.2 billion). The intervention occurred on October 31st. On that day the low for the USDJPY was 75.56 and the high reached 79.52. The price has since moved down to the lowest level since that intervention at the 76.017 level. BOJ Shirakawa amd Finance Minister Azumi has each stated recently that they won’t rule out any action to curb the rise including intervention.
EURUSD moves higher on Greek statement (Again)
The market is clearly trading with short term intentions in place. Markets are sloppy. The market moved quickly to the upside on yet another comment about a Greek bailout. Because of the headline effect it seems that the real movers in the EURUSD market are simply waiting for the dust to all settle. This helps contribute to the up and down action.
Nevertheless the EURUSD has moved above the previous high for the day above 1.3167 and looks toward the next target at the 1.3184 area. The high from last week came in at the 1.3226 level. Other highs during the week were at 1.3217, 1.3211 and 1.3204. These will also be targets above.
On the downside the 100 and 200 hour MA have converged at the 1.3130 level and this will now be support for intraday traders.
Recognize the markets are sloppy and therefore deserve being patient for risk defined entries. At those points, the market will work for you or you get out. The best way to define risk is still technical levels. Keep stops in place and be prepared for a bumpy ride.
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