Super Mario Will Tell it Like it is Today... Perhaps

Well today is the day where the other meaningful Italian in our lives takes centre stage and Super Mario enters the arena. I speak of course of the European Central Bank rate decision and ensuing press conference. As always in recent months there is the potential for the central banker to cut rates once more and indicate how he feels the Eurozone economy is likely to fare in the coming weeks. It would be hard to imagine that anything overly new or positive will come out of the rhetoric, and no doubt there will be mention made of the Long-Term Refinancing Operation (the one just been and more importantly the February 29 tranche). His answers to the press questions about the LTRO will be the most interesting part of the press conference as he attempts no doubt to justify the ever growing Ponzi scheme developing in Europe and define the Clayton’s printing that the ECB has undertaken.

The other central bank taking the limelight is of course the Bank of England, which is broadly expected to leave things on hold as they have been for a while now. Speaking of the Sterling, the Cable and the EUR/GBP went for a ride yesterday with the former being the biggest mover in the European session, breaking all manner of recent support and downside range supports, cleaning stops out with clear abandon. There seemed to be nothing solid behind the move (usual whispers and market rumours aside) and taking into account the still present thin liquidity and volume issues we’re faced with, this may simply be seen as a small catch up to the path lower that the EUR/USD has taken in recent days.

Other market rumours yesterday included and subsequently denied the impending French downgrade and more left hand side fixes for the EUR/GBP cross (today apparently is the day for a large one way flow, supportive of GBP).

Other releases today will have the market heavily focused on Spanish and French government bond auctions with what has so far seen the ECB apparently already heavily in the market buying Italian paper, which gives us a broad indication of where the line in the sand sits with regards to the other peripheral debt being offered today. Yields on this paper continue to fluctuate, however the overriding bias for ballooning borrowing expense continues. Further to this we also have the US weekly claims and retail sales with UK manufacturing data leading the charge as the first cab off the rank this morning.

The session overnight was a quiet one as stocks meandered through the night with no discernible lead to be taken from the Asian bourses. And thus we sit today waiting for the various headlines that will be coming out as a result of the above mentioned events risks.

Looking at levels for the crosses, we remain range bound for the most part and even in instances where ranges have been supposedly broken of late, we still revert to familiar pivot levels which need to hold for confirmation of broader ranges still being in play.

In the EUR/USD, we’re looking at an almost USD/JPY like story where the paint continues to dry in a continually shrinking range. The levels as per recent comments that need to be considered are 1.2830/50 on the upside (only a close above sees us rethink recent direction) and on the downside 1.2500/30 is the level that needs to be tested and taken out if we’re to see a real move lower in the coming days/weeks. Yesterday's slide while not insignificant, has done little to really alter the current picture and has perhaps served to wipe some small short-term longs and stops that were looking for a contrarian bounce.

The Cable as mentioned earlier has moved lower, but until such time as 1.5250/30 is taken out and closed below we simply shift the recent range lower by about a figure or so. I remain marginally bullish the Sterling and have chosen to express this against the CAD, taking the USD noise out of the story.

The AUD/USD is confined to the 1.0250-1.0430 range with the downside looking a little more vulnerable at this stage.

I have very little on at present in the market save for my overnight fill in the GBP/CAD and will likely keep it this way for the remainder of this week, as things continue to settle into the new year.