EUR/USD: 1.3140
The Euro remained heavy all day. After failing to bounce following the FOMC minutes, confidence was further eroded on the release of weaker than expected German manufacturing data and EU Services PMI which, although slightly stronger than expected at 49.2, still appears to have the EU heading into recession. EU retail sales dropped -0.1% mom in February.
Adding to the woes was the ongoing concern over Spain, where a bond auction was unable to find buyers for the full Eur 3,5bio that it was hoping to sell – done at a worrying rate of 5.34%, and raising doubts over Spain's ability to meet the deficit target of 5.3% of GDP this year. Unsurprisingly the ECB left rates unchanged at 1%., although Draghi did his best to talk up the situation at the Press Conference.
It hasn't done a whole lot of good though. European equities fell heavily, about 2.8% (S+P -1%) and the Euro is currently undergoing a dead cat bounce off its session lows of 1.3107.
So where to from here? The 4 hour charts are not signalling the likelihood of much of a bounce, although the shorter term charts are very oversold and are in the process of unwinding. The Fibo resistance levels of the recent drop from 1.3385 to 1.3107 are at 1.3170 (23.6%), 1.3210 (38.2%), 1.3240 (50%) and 1.3275 (61.8%). Right now, the charts are suggesting that we may struggle to see it back above 1.3200. The dailies are beginning to point lower. Currently the rising upterend support lies at 1.3130. We have been below here today, but having recovered we need to see a more sustained push to see further downside action below 1.3100. The next support levels are at 1.3055 (50%) of 1.2623/1.3485. Below this would see a push onto 1.2970/1.3000. This looks as though it could come under pressure next week, possibly even after the NFP on Friday. (The ADP came in pretty much in line with expectations +205K. NFP is expected to be +203K and Unemployment Unchanged at 8.3%).
Volume will begin to thin out today, ahead of Easter. NFP data, tomorrow.
Today we get HSBC Services PMI Mar, prev 53.9 and later on US Jobless Claims.
Look for 1.3100/1.32 to cover it early on, with a mild bias for a squeeze higher in Asia.
