Asian markets were generally stronger today with the exception of the SSE composite which was off last week for the Chinese lunar new year. The Nikkei hit 3 week highs after US markets closed out a second week of gains on Friday following 4 weeks of decline. Markets in the region saw large sell offs in response to the Fed's increase of the discount rate last week. Contrastingly, the US did not have such strong responses on the news as markets were relatively flat on the session close Friday.
Euro Looses Steam
The euro was largely unchanged early in London trade. Having tested 1.3650, the single currency relinquished its gains and held steady around the 1.36 handle. Fridays' rally off the 9-month low, put a halt to the dollar's recent surge as traders seemingly shrugged off the Feds rate hike with the Dow closing up roughly 10 points. The euro still faces considerable downward pressure as fundamentals still point to economic unrest in the region. Speculation that Germany has prepared a preliminary plan to bail out struggling Greece with some 20 billion euro's did little to support the currency as traders question whether the bailout will be enough to solve the fundamental problems facing the EU. Many analysts see deeper problems with the currency, including additional sovereign debt issues with countries like Portugal and Spain. A break of the interim support at 1.36 leaves room for losses down to 1.3525 and further to 1.3479. Additional support levels appear at 1.3445 and lower at 1.3316. Strong upside momentum picks up with a break of the 1.3670 resistance level. Here the convergence of the upper bound of the downward channel, dating back to Jan 14th, and the 61.8% Fibonacci extension taken from the Feb 18th highs through today's, should keep the euro subdued. A break here however, leaves further ceilings at 1.3750, the 1.38 handle, and higher at 1.3884.
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