The euro broke support at $1.40 after a descending triangle lasting several months. Breakout was most likely precipitated by the resignation of Jurgen Stark from the ECB. Target for the breakout is $1.30*.
* Target calculation: 1.40 – ( 1.50 – 1.40 ) = 1.30
Germany’s top representative on the European Central Bank resigned in an apparent protest of the bank’s recent interventions in euro-zone debt markets…….Jürgen Stark is stepping down “for personal reasons,” the ECB said in a statement…… Mr. Stark, one of the ECB’s most outspoken anti-inflation “hawks,” had opposed the ECB’s decision last month to reactivate its government bond purchase program….
The combined assets of the nation’s mutual funds decreased by $219.2 billion, or 1.8 percent, to $12.009 trillion in July, according to the Investment Company Institute’s official survey of the mutual fund industry.
The Aussie Dollar is testing support at $1.045 against the greenback; failure would warn of another down-swing to parity*. Breakout above $1.075, however, would re-visit $1.10.
* Target calculation: 1.05 – ( 1.10 – 1.05 ) = 1.00
AUDUSD is strongly influenced by commodity prices and closely tracks the CRB Commodities Index. $CRB is rising and breakout above 350 would indicate a primary advance to 385* — suggesting increased support for the Aussie Dollar.
* Target calculation: 350 + ( 350 – 315 ) = 385
The Pound is testing support at $1.60/$1.59 against the greenback, dragged down by rising calls for another round of quantitative easing to assist the flagging UK economy. Failure of support would signal a primary down-trend with a target of $1.53*.
* Target calculation: 1.60 – ( 1.67 – 1.60 ) = 1.53
The Swiss National Bank (SNB) threw a similar lifeline to Swiss exporters and tourist industry, pledging to support their currency at 1.20 Swiss Francs against the euro with “utmost determination” and to “buy foreign currency in unlimited quantities” to achieve this. [Bloomberg]
The euro jumped from 1.10 to 1.20 CHF on Tuesday and has been trading in a narrow range between 1.20 and 1.21 since then. Further speculation is inadvisable unless you have deep enough pockets to take on the SNB.
Germany’s high court threw Chancellor Merkel a lifeline, ruling that bailouts of struggling euro-countries are legal in terms of the German constitution. But they also created an obstacle to further assistance, requiring that parliament vote on any future bailout decisions. [WSJ]
The euro continues to test support at $1.40 against the greenback. Failure would signal a primary down-trend with a target of $1.30*.
* Target calculation: 1.40 – ( 1.50 – 1.40 ) = 1.30
Budget experts from both political parties warned at a Business Roundtable forum on Tuesday that the congressional Super Committee preparing for its first meeting later this week needs a long-term vision that goes beyond cutting $1.2 trillion from the federal deficit over the next decade.
“These guys have only a 10-year window. They can get $1.2 trillion fairly easily. But don’t think that’s success,” said Alice Rivlin, founding director of the Congressional Budget Office and a senior fellow at the Brookings Institution. “Success is putting in place longer-term reforms that are going to stabilize the debt… it means a lot more than $1.2 trillion, and it means ultimately what would come out of this would be more like $4 trillion or $5 trillion.”
Dow Jones Europe Index ($E1DOW) recovered above 230 and is expected to consolidate between 230 and 250. The bear market remains strong, with 13-week Twiggs Money Flow below zero indicating selling pressure. Reversal below 230 would test the 2010 low of 205, though the calculated target is lower*.
* Target calculation: 230 – ( 265 – 230 ) = 195
Dow Jones Industrial Average rallied, suggesting a second higher low above primary support at 10600/10800. Expect a test of 11900/12000, but this does not mean the bear market is about to reverse. We are still in the early “denial stage” of the bear market, identified by sporadic bargain-hunting, high volatility and a general lack of direction. Declining volume indicates a lack of enthusiasm from buyers and sellers. Failure of primary support would change that, leading to a sharp fall to 10000*.
* Target calculation: 11000 – ( 12000 – 11000 ) = 10000
