AUD/USD: 0.7450EUR/USD: 1.1180The ECB eased policy, as expected, and increased the monthly asset purchase programme which initially had the desired effect and sent the Euro lower. Mario Draghi then undid all his work by hinting that he doesn't anticipate any more cuts. The Euro reversed sharply higher, with the US$ coming under pressure against all the other European majors and the Yen, while the commodity bloc are generally a bit lower as risk sentiment soured somewhat. Stock markets did not particularly like the news either. The S+P and the Dow, having both briefly made new trend highs on the news of the easing gave up their gains very quickly on hearing of a possible end to the easing cycle. Today will be largely spent in assessing the ECB decision, but elsewhere the main point of focus will be on the German Inflation numbers. There is little else aside of that today, but note that the Chinese Retail Sales, Industrial Production and Urban Investment are due over the weekend.
After reaching 0.7527 on Wednesday, AudUsd then came under some downside pressure after the surprise rate cut from the RBNZ yesterday, driving it from above 0.7500 to a low of 0.7460. Some wild gyrations in EurAud following the ECB announcement saw a quick move back to 0.7512 in AudUsd before it reversed lower and now sits back at 0.7445 after having recovered from a low of 0.7426.
Today will again focus on disseminating the ECB decision, although traders will also be aware of the data due to come from China over the weekend. This will include the January Retail Sales (exp 10.8%), Industrial Production (exp 5.6%) and Urban Investment (exp 9.5%). With no data due today though, it will be the risk on/off theme that drives direction.
Technically, the session low has met the Fibo support at 0.7425 (23.6% of 0.7108/0.7527) which will again see buying interest. Back below here would look to 0.7400 and possibly lower to where the next support is seen at 0.7365 (38.2% of 0.7108/0.7527) and then at 0.7350 200 (HMA). Under here, unlikely today I suspect, could then see a return to 0.7317 (50%) and then to 0.7265 (61.8%).
On the topside, resistance will be seen at 0.7485 and 0.7500 (both minor) and at yesterday’s high 0.7527. Above there would target 0.7532 (2 April 2015 low) and then the May/June 2015 double bottom lows at 0.7597. Beyond there lies the next Fibo resistance at 0.7648 (61.8% of 0.8162/0.6826) but is currently a long way off. In the longer term, the next major Fibo level is at 0.7845: 38.2% of 0.9504/0.6826).
The daily charts, while still looking constructive, may be in the process of rolling over, and with the 4 hour charts pointing lower, selling into strength with a SL placed above the 0.7527 trend high, or more likely, above 0.7535, may be the plan.
Economic data highlights will include:
Saturday: China Retail Sales, Industrial Production, Urban Investment.
Jim LanglandsFX Charts
