EUR/USD: 1.3185The Euro continued to rise from its recent low after Initial jobless claims in the US rose 23k to 380k, the weakest number in 3 months, that saw the US$ weaken across the board. The number leaves open the possibility of another round of Quantative Easing (comments from various Fed members seemed to endorse this view) and saw the US$ head lower against most currencies, while equity markets have rallied at the possible prospect of a further easing of monetary policy (Dax +1% , CAC +1% S+P +1.4%). A mixed Italian bond auction was largely ignored and the market now awaits the Chinese GDP number where a strong reading is expected following yesterdays stronger Korean and Australian employment data, (exp +8.4% - but rumours doing the rounds of a number in excess of 9%). Until then the market looks likely to be on hold with the Euro currently sitting just below 1.32. The medium term outlook remains somewhat uncertain with Spain and Italy currently in the markets focus and with Greek and French elections around the corner.
Technically the 4 hour charts suggest that the Euro could head a little higher, although the 1 hour charts (below) are approaching overbought levels and have so far failed at the 50% Fibo level of the move from 1.3380/1.3030 at 1.3205. The Euro has already gone a little further than I thought might be likely and stop losses need to be kept tight in case momentum continues to the topside.
Little looks likely to happen until the Chinese numbers and a range of 1.3160/ 1.3210 should cover it for now. If 1.3210 can be overcome then we need to look at the prospect of heading towards the next Fibo levels at 1.3245 (61.8%) and 1.3296 (76.4%).
The downside for now looks the less likely, although a poor Chinese number would change the outlook here very quickly. The initial support is currently at 1.3160 and then at 1.3110. Below here we are heading back to the recent lows and the strong 1.3030 support.
Aside from the China GDP/Retail Sales, we also have inflation data, with both German and US CPI later in the day. Bernanke will also be speaking and will no doubt be his normal dovish self. This leaves plenty of opportunity for volatility, so keep stops tight!
Remember it is Friday 13th!
