European Woes Continue

Coming back from the Labor Day holiday, US investors have been caught a bit off guard by the reversal of sentiment toward Europe. The euro had rallied in the immediate aftermath of the stronger than expected US jobs data ostensibly on a greater appetite for risk. There was some follow through early yesterday and then only lower.

Anecdotal stories include empty shops in Greece and concerns over the lack of government's in Belgium and the Netherlands. French unions are on strike today in Paris. Irish bank solvency has re-emerged as a key issue. Today a European bank took 60 mln dollars from the ECB's Fed swap line. The ECB noted that last one one bank--perhaps the same one as this week--took 40 mln dollars from the swap line at a rate as much as 4-times greater than LIBOR.

The euro high in the North American session has been $1.2772. Chart-based resistance looks to be in the $1.2800-20 area, the high from the European session. Hourly RSI's are over-extended and that leaves the euro caught between poor fundamentals/sentiment and near-term supportive technicals. Range trading is the most likely result near-term.