The overnight session can only be described as a “modest’ rally for risk. Global equities managed to pare their weekly losses, but the sooner we can get out of this month, this quarter, this year, the better. Observing the past quarter is almost like being witness to a slow motion train wreck, something you hope you would never have to see. However, we have seen it and we can only hope that rescue measures will convince capital markets of the Euro’s viability.
This EUR continues to struggle on rallies. The market, if it ever wakes up from this slumber, prefers to trade from the short side, believing that these “rallies†will provide an opportunity to improve that short EUR, long dollar average. In this classic trading scenario, the market tends to like a ‘squeeze,’ a follow through that forces the weak shorts to second guess themselves, again. At the moment this market has very little momentum. However, there are some key levels to watch out for if the market ever decides to stir. While the EUR is showing little inclination to trade below 1.30 at the moment, another toxic Euro headline would trigger more sell off where digital options supposedly kick in around 1.29. If so, price levels here will be defensive, and volatile below.
The market is thin on data this morning. The Euro-zone’s trade surplus with the rest of the world shrank in October. The region showed a +EUR1.1b surplus, down from +EUR3.1b in the same month last year. Exports grew +6% on the year but were outpaced by imports rallying +7%. It’s not a surprise that Germany led the way with exports ‘outside’ the region shrinking -1.7%, while its imports grew +2.6%.
This morning in North America, the market hangs it’s hat on US CPI. Analysts are expecting a +0.0%, m/m, headline print and +0.2%, m/m, on the core. This data is difficult to get worked up about. Steady price pressures, combined with the recent rehash of the FOMC’s policy stance, are likely to minimize the impact of today’s data. Perhaps we can escape unscathed just for the day. Next week, investors will do battle with pockets of liquidity and because of the short week will find it expensive executing positions of size.
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