EURUSD continues slow and grinding assault on 1.35

Market Review

Yesterday afternoon saw breaking news out of Ukraine as a Malaysian Airlines passenger jet was gunned down over Russian rebel held territory. The incident is being investigated further but it looks as though this was a mistake made by the Russian sympathisers who believed the plane to belong to the Ukrainian military. The event added to already increased geo-political weight on the markets as a result of continued tension between Israel and Hamas and the stringent sanctions imposed on Russia that morning. The confluence of forces supported oil to the $103 handle and weighed on equities going into the close. It is interesting to see that WTI Crude was trading at just $98.69 three days ago, sentiment on the commodity has changed rapidly. Our entry short on the S&P yesterday was the correct trade although our tight stop at 1974.00 did not allow this trade to be held before the index plunged. The short on the EURUSD, again at pivot, was a better managed trade although the target of 1.3502 not reached as the pair traded into the close around its lows at 1.3521.

Today's Fundamental View

We are looking closely at the EURUSD today which continues its slow and grinding assault on 1.3500. The last significant move was on Wednesday morning, since when we have traded in a sideways range between 1.3540 and 1.3518. We believe the US data this afternoon will continue to outperform and we are confident that 1.3500 will be reached. However, as we saw yesterday after the positive US data the USD bulls are not jumping in just yet, perhaps they have had their fingers burned too many times already this year. We still think the equity space will come under pressure given the weight of geo-political factors mentioned above, although we are not expecting 'the big correction' until their is a definite change in sentiment. Going against the correction expectation is of course the stellar corporate results seen out of the US, specifically in the banking sector this week and now with the tech sector joining in. But the Malaysian Airlines incident should continue to control overall sentiment today with perhaps markets able to focus back on macro factors next week IF the Ukraine factor doesn’t significantly escalate over the weekend.
 

Alternative View

Should there be a statement from Russia or the US that is aimed to calm market fears you may see the S&P breach yesterday's high of 1975