Morning Futures Roundup
Voting Against Austerity Sinks the Euro
Like a cat, the Euro seems to have nine lives, as the currency once again has failed to sell-off sharply, despite rather bearish news. Over the weekend, election results in both France and Greece favored anti-austerity candidates, putting into question any current bailout efforts and which may eventually set the state for Greece leaving the Euro. In addition, elections in the German state of Schleswig-Holstein, were not favorable for the political party of German Chancellor Angela Merkel, potentially leading to more internal opposition to Germany's hard-line stance towards reforming the spending habits of struggling Euro members. These election results may move EU leaders towards more stimulus measures, such as lowering interest rates to near zero, a bias towards more increased government spending in order to help spur economic growth.
Both these factors would normally be bearish towards the Euro, but after an initial sell-off subsequent to the election results being announced, the front month June futures rebounded back above 1.3000. Some of the rebound in the Euro was tied to a positive German factory orders report that dampened some of the bearish momentum for the Euro. In addition, the large net-short position being held by speculators may have resulted in a sell-the-rumor and buy-the-fact reaction after the elections, as the outcome really was of little surprise to many analysts. Going forward, some traders may wish to focus on the Euro's reaction to what is deemed "bearish" or "bullish" news and wait for a positive correlation between the news and outcome to explore positioning in the direction of the market move.
Looking at the daily continuation chart for the Euro futures, we notice that the rebound on Monday from over 3-month lows did not last long, as Tuesday's sell-off has once again put the Euro on the defensive. The 14-day RSI is weak, with a current reading of 34.89. Should Monday's low of 1.2957 give way, there is little support seen until the 2012 low of 1.2627 made on January 13th. The next resistance area is seen at the 20-day moving average, currently near the 1.3157 area.
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