EUR/USD: 1.3370The Euro got off to a tough start in Europe with even worse than expected Spanish Q4 unemployment (26.2%) closely followed by a very poor French Composite PMI of 44.6, the worst reading in almost 4 years. Things turned round almost immediately though, with the German manufacturing PMI rising strongly to 48.8 against an expected 46.8. This was all followed later in the session by the US Jan manufacturing PMI, which showed a better than expected reading of 56.1 (exp 53.0) and the jobless claims, which continue to improve (330K)
It all got pretty erratic either side of 1.3300 earlier on and saw a session low of 1.3285 following the French data. Since then it has traded up in pretty choppy fashion to a high of 1.3395. We are thus still in the recent 1.3250/1.3400 range of recent days and for the time being do not look moving too far from it.
Today will be driven around by the German IFO Business Climate, which could be a decent reading following the recent pickup in the German data and later we get the US New Home Sales.
Also of note today; the ECB will announce the details of the plan for European Banks to prepay their LTRO loans taken out last year. EU banks will be given the option to re-pay part of the LTRO liquidity provided by the ECB, which added up to more than Eur 1T. The general feeling appears to be that, depending on how much of the loans get pre-paid; this could be quite bullish for the Euro as the ECB balance sheet shrinks. Wait and see what the outcome is, but worth keeping an eye on.
Technically, we are today near the top end of the recent range and thus the points to watch remain pretty much unchanged. Above today's high, 1.3402, - last week's high, - currently remains intact, above which would most likely see an acceleration towards 1.3485 (50% of 1.4939/1.2041) and even to 1.3547 (2 Dec 11 high). The shorter term momentum indicators do suggest that this is the most likely direction, although the dailies are yet to give any hint of moving out of the range, so while I would not be getting too carried away on the topside, I suspect that, as with yesterday, buying dips is still probably the favoured strategy.
Those dips, if seen, should now find short term support at 1.3350 and then at 1.3300. Below this, 1.3250/60 is pretty solid ahead of 1.3248 (38.2% of 1.2997/1.3402). Although unlikely, a deeper setback would head towards 1.3200 (50%) and then 1.3150 (61.8%).
All up stay flexible, but look for a slightly stronger Euro next week, I think.
Economic data highlights today will include:
German IFO Business Climate, US New Home Sales
