Morning Futures Roundup

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Eurozone Inflation/Debt Woes Cause Indecision

 Fundamentals

The Euro continues to trade in a range between the 1.30 and 1.35 levels, on indecision among currency traders. The market has been in this range since late November, as traders have been entrapped in a tug-of-war between bulls that see inflation taking hold in the Eurozone and skeptics concerned over the sovereign debt situation. The news out of Europe over the past two days has done little to help the situation.

Yesterday, indicators showed higher than expected inflation. Eurostat, the EU's statistics office, reported than inflation was at 2.2%, which is above the ECB's 2% target. This morning, the Eurozone's services index dropped to 54.2 from 55.4 the prior month. When one breaks down the numbers, Germany's services index actually rose, but both Ireland and Italy saw declines. This may be alarming for some traders, as Ireland has already been bailed out and Italy is rumored to be one of the candidates for a bailout due to rising budget deficits.

The fact that the US and Japan also have rising government debt has put traders in a very awkward position, as there is little faith in the EU, US and Japan at the present time. Unless economic metrics offer more clarity, the market may continue to be trapped in its current trading range.


 Technical Notes

Turning to the chart, we see the March Euro contract continuing to consolidate. The 1.3009 level, a relative low close, will be a pivotal level on the downside. A solid close below this level could be a sign of a downside breakout, whereas a rebound could be a sign of further range-bound trading. The markets continue to trade below the 50-day moving average, which happens to coincide with the upper level of the range at the moment. A breakout above the 50-day could be seen as bullish over the medium-term.


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