EUR/USD: 1.3233
The dollar soared after the FOMC minutes suggested that the Fed is unenthusiastic about undertaking a further bout of QE. It seems rather a large overreaction to me, given that they have told us nothing particularly new in noting that “the signs are, of stronger growth in the US economy but they remain cautious about a broad-based recovery “. Fewer Policy members thought that there might be a need for any further QE. That was about it, but it has caught the market off-guard. US 10 year yields have mover back up towards 2.3%, while equity markets have eased. In Europe the DAX finished down 1.1%, the CAC -1.6%, as worries over the Spanish economy came back into view, and the S+P is down 0.4%, having recovered from its earlier lows.
So technically we are now back to well within the middle of the range, and as we suspected over the weekend, the 1.30/1.34 band continues to dominate trade. That looks unlikely to change now before the NFP unless the ECB springs a major surprise at the rate decision/press conference later on today.
Short term resistance is now to be found at 1.3250 and above here at 1.3285, while the downside may target 1.3190 (26 March low), ahead of the 38.2% Fibo support of 1.2623/1.3485 at 1.3158. Below here the rising uptrend support line is currently at 1.3130.
After the move we have just seen though, I would imagine some consolidation is likely while the market scratches its head to work out exactly what has happened and why! 1.3190/1.3250 should probably cover it through Asia, and possibly until the ECB later today. Although the hourly charts have turned sharply lower, the 4 hourlies are only pointing mildly south and the dailies are pretty much flat, so don't expect any continuation of this move. More likely we are in for continued choppy conditions.
ECB aside, we also get the ADP employment later from the US which may give us a hint as the NFP and could provide some volatility.
