EUR/USD:
The Euro finished last week on a stronger note after the better than expected German IFO survey was backed up by the G20 confirming that they would pledge $430 bio in order to fight the EU debt crisis.
Further gains in the week ahead may be limited as we approach the French and Greek elections. The financial situation in Spain and Italy will also ensure that any further gains are limited and bond yields will be closely watched. Spanish 10 year yields again traded above 6% on Friday.
The first round of the elections has taken place today, where Francois Hollande has beaten Sarkozy and with the second round due on May 6. The expected final result would see Hollande removing Sarkozy from office and this outcome would be viewed as a depressing result for the French economy, with obvious flow on effects for the EU. He would be the first Socialist President of France since Mitterand in the 1980's, which would not be greeted with enthusiasm in the financial markets. For a start, he wants to punitively tax the rich and to impose a tax of 75% on any income of over Eur 1 million, which is going to be viewed as a negative factor for economic growth.
May 6 will be a big day to look out for as this is also when the Greek election takes place. On top of this, we have the Irish referendum coming up on May 31 on the EU fiscal compact, so it is difficult to become too enthusiastic about the Euro.
On the other side of the coin, the continuing weak readings in the US employment data are a concern and the Jobless Claims this week will be closely watched. The recovery in the US will be a long and slow process, so any dollar strength, should we see it, is likely to be somewhat limited. Before we see the jobless data, the highlight in the coming week will be the FOMC meeting on Wednesday.
So the Euro is up 1% on the week but remains firmly within the 1.30/1.33 range and although the 4 hour charts are hinting that we could go a little higher early in the coming sessions, the dailies are not giving an awful lot away. 1.3235 is the immediate resistance (61.8%1.3384/1.2994), and above here 1.3265 (white downtrend resistance), 1.3290 (76.4% Fibo resistance) and 1.3310 (red downtrend resistance) all provide barriers. On the downside, 1.3178 is the first, minor support (23.6% of 1.2994/1.3226), ahead of 1.3150 (38.2%) and 1.3110(50%/Uptrend).
Early in the week I would not expect too much action unless we get any surprise announcement from the EU, so all being equal, look for a 1.3180/1.3265 to cover it as far as Asia is concerned. The result of the French elect ion may dampen early enthusiasm for the Euro.
Aside from the FOMC (Wed), the major economic data to look out for is:
German/EU PMI (Monday),
US Consumer Confidence (Tuesday),
US Durable Goods (Wednesday),
German CPI, Retail Sales, EU Consumer Confidence, US Jobless Claims (Thursday),
US GDP, Personal Consumption, Michigan Consumer Sentiment Index, (Friday.)
