MidSession Review: Struggling to Make into the Green

European markets are struggling this morning to make into positive territory as image of strikes across southern Europe, to protest against spending cuts and tax hikes, kept the focus firmly on the region's debt crisis.

The Stoxx50 fell 0.30% to 2,485.59, the German Dax fell 0.37% to 7,142.48, in Southern Europe the Italian Ftsemib fell 0.17% to 15,306.80 while the “forgot” Spanish Ibex rose 0.06% to 7,697.80.

Although Greece is now expected to receive short-term funding to meet its debt obligations, the lack of an agreement on the road map to follow to cut its borrowing needs to more sustainable level failed to sustain upside momentum.

The uncertainty surrounding the “Greek affair” failed to deter investors in the latest auction of Italian three-year debt, whose yield fell to its lowest level since October 2010 to 2.64%, down from 2.86% at a similar auction last month. Demand weakened slightly, with bids exceeding supply 1.50 times, compared to a “bid-to-cover” ratio of 1.67 last month. The yield on Italian 10-year bonds stood at 4.93% following the auction.

Meanwhile, the common currency rose 0.27% versus the greenback to 1.2743$ and climbed one percent against the Japanese unit to 101.87 Yen.  The US dollar rose 0.7 percent to 79.90 yen but eased against most other major currencies on speculations that the Fed will use ultra-loose monetary policy in the coming months to overcome “fiscal cliff's” spillover.

Confirmation of this hypothesis is expected to be shown in the latest minutes from the Federal Open Market Committee meeting, which will be released later in the day.

Commodity wise Oil(WTI) rose 0.08%  although the International Energy Agency (IEA) cut its demand outlook for the fourth quarter and 2013. Gold instead moved in divergence compared to other asset classes falling 0.10% to 1,723$ an ounce.

For what it may concern our daily Game Plan, the move in the $EURUSD did not give us the signal to load our gun once the 80 level early in the day has been broken.  Under the pressure of our short-bias we were unable to trade the long-side once the 80 level has been regained and therefore we are still at the window.

Originally posted at www.77sigmatrading.com