EUR/USD: 1.2300
The Euro remained steady today ahead of the Central Bank action beginning later in the coming session when the Fed hold the FOMC meeting, to be followed up tomorrow by the ECB and the BOE.
The Euro actually made minor gains against most currencies, as hopes persist that the ECB will resume its bond buying programme to help lower borrowing costs of the indebted nations such as Spain and Italy and Monti needs to follow up the rhetoric of last week.
The Euro did not receive much help from today's data, where unemployment across the EU rose to a record 11.2%, and German retail sales were below expectations at -0.1%. Across the Pond, although Personal Income rose by 0.5%, Expenditure was flat, keeping pressure on the dollar and thus maintaining the hope that Bernanke will announce some sort of economic stimulus, in the name of QE3. I don't think they should get too excited, but we will not have to wait too long now to find out. If he, and probably more importantly ECB Chief Monti do not satisfy market expectations, it could get rather ugly over the following 24 hours.
Technically, nothing has changed from yesterday. The 4 hour charts continue to slowly unwind their overbought nature and this will persist until the NY open.
Immediate support, below the current session low of 1.2248 is found at 1.2225 followed by 1.2217 (50% of the recent rally from 1.2042/1.2390) and that should easily cover the downside through Asia and Europe. Beyond that 1.2175 and 1.2124 (61.8% + 76.4%) should provide backup support. If the Central Banks fail to deliver, then a revisit of last weeks lows is back on the cards, although the dailies are not suggesting that this is likely - yet.
On the topside, 1.2330 - the session high - should provide an immediate cap, above which we would begin to look at the trend line resistance at around 1.2400.
The indicators suggest that the we will see slightly higher levels in the Euro in sessions to come and the 1.2400 area should see some keen sellers but a break would see a reasonably quick more along to 1.2515 Fibo resistance (38.2% of 1.3282/1.2042) and then possibly even to the 50% pivot at 1.2660. This is some way off at present but the indictors are suggesting that we should not rule it out, so the game is to remain pretty flexible.
For the time being, you may as well do something else and I suspect Asia will be confined to a narrow 1.2280/1.2330 range. Direction all depends on the Central Banks and if they fail to deliver dont expect to see the equity markets or risk assets at these levels by the time we get the NFP on Friday.
Before the FOMC today we get the EU Mfg PMI data which may provide a bit of volatility.
