EUR/USD: 1.2970\Having squeezed up to 1.2996 in the first half of the session, the Euro was then undone by the data from the EU where the German IFO business confidence index fell for the sixth successive month and was sharply lower than expected. This was closely followed by the poor PMI data, with the EU showing the lowest composite reading (45.8) in over 3 years. While the French composite result rose from 43.2 to 44.8, the German reading showed a decline from 49.2 to 44.8 with a dire manufacturing number of 45.7, against an expected 48.0 , all of which added up to a quick fall in the Euro to 1.2921 before some consolidation and a partial recovery to 1.2983 as the market awaited for the FOMC.
In the end the FOMC left rates unchanged and held to their mid-2015 guidance for keeping rates ‘exceptionally low" and had little effect on the market
Elsewhere, Mario Draghi was in Berlin today, justifying the ECB bond buying programme to the German parliament. It looks like he did a pretty good job in convincing them that it would not be inflationary, but getting the German population onside may be a far more difficult task.
With the Euro now at 1.2965, little has really changed technically since yesterday's outlook.
Despite the brief fall to 1.2921, the bounce has seen the Euro currently hold on to levels at 1.2945 (61.8% of 1.2825/1.3139). Back below this and then below today's low would see a decline toward 1.2900 (76.4%). The rising trendline, currently at 1.2895, should prove strong support at the first attempt but a break would take us to the 200DMA, now at 1.2832, which has held pretty well on previous attempts, above the 1 Oct low at 1.2802.
The topside will see sellers at 1.3000, and back above here towards yesterdays 1.3074 high. 1.3110 is where the long term descending trendline now lies and should prove strong, but a break would see the 17 Oct, 1.3140 high, which is also 38.2% of 1.4939/1.2042. Above this would see a return towards the 17 Sept 1.3171 high and then to 1.3266,1.3368 and 1.3480, all of which acted as tops between February and April, although it looks unlikely that they will come under pressure this week.
The 4 hour indicators are beginning to point lower but look to be flattening out, while the 1 hour charts are actually showing some bullish divergence, suggesting the chance of a rally towards 1.3000 and possibly a bit higher, which would attract sellers looking for the next leg lower. Overall though, I suspect that we need to continue to respect the converging trendlines, so I would be looking to reduce positions if/when we approach either the top or the base (1.3110/1.2895)
Today sees the weekly US Durable Goods, Jobless Claims and then Pending Home Sales. Look for 1.2920/1.3020 to cover it initially.
