The Dollar was on the back foot early in the session following the US growth downgrade for 2006/2007 and a bout of pre-Thanksgiving position adjusting. A better than expected return for Italian November consumer confidence added to the EUR/USD bid feel.
The Italian data showed 109.2 from 108.6, the market was looking for a milder increase to 108.9. This came from the dip in October following the 2007 budget which increased taxes on mid & high level earners. November's rebound comes amid a pick up in wages and lower inflation (fall in gasoline prices), however the breakdown reveal that consumers are still concerned about the overall economic climate.
The tentative bull bias has put a positive tone to the charts and a break above recent daily tops. Option expiries with 1.2875 strikes are said to be large, in excess of 250 mln, and barriers are reportedly camped at 1.2900 and 1.2950. Option related interest could provide volatility this afternoon within a 1.2850 to 1.2890 range. On balance a buy but price action remains subdued.
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