EUR/USD: 1.3315The Euro has traded sideways today, in a tight 40 point range, in the absence of NY and ahead of the BOJ decision later on in the coming session.
The only point of any real interest was the German PPI which came in at -0.3% mom, +1.5% yoy, slightly weaker than expected.
The Bundesbank later said that the German economic turn down should be short-lived and could have already bottomed out. This ensured that the Euro was going to remain supported through the session, and consequently nothing has really changed from a technical perspective.
A close eye though will need to be kept on Eur/Jpy today and if the BOJ disappoints, which is very possible given that much of the good news is already priced in, then the Euro could come under a bit of pressure as profit taking on the cross sets in.
The downside for the Euro remains protected, initially at 1.3255 – last week's low – and provides the initial support ahead of 1.3248 (38.2% of 1.2997/1.3402). Below this would see a deeper setback towards 1.3200 (50%) and then 1.3150 (61.8%). The white trendline support (below) is now at 1.3030 and could come under pressure if there is a wholesale clearout in Eur/Jpy, but right now looks unlikely to be seen.
In the longer term, the weekly charts are building positive momentum and thus any short term dips may well be buying opportunities for an eventual retest of last week’s 1.3402 high. If we get above there I suspect that we may accelerate towards 1.3485 (50% of 1.4939/1.2041) and possibly to 1.3547 (2 Dec 11 high). As I said last week, this looks some way off but with sentiment seemingly slightly more positive in Europe, as espoused up by today's Buba prognosis on the German economy, it appears that overall that short term dips may provide buying opportunities for a medium term move to slightly higher levels.
The 4 hour charts do still point slightly lower and a move towards 1.3200 may eventuate which in turn may prove to be a level to begin looking for the next leg higher. Traders will have one eye on the Eco Fin Min meeting today, although nothing is expected to come out of it. The German ZEW data will be closely watched and there is a bit of data out of the US that could make for an interesting session.
Economic data highlights will include:
T: EU Eco Fin Min meeting, German/EU ZEW survey, US existing home sales, Richmond Mfg Survey.
