EUR/USD: 1.3495The Euro has again tried the upside, after much weaker than expected US Confidence data, but so far has failed to break 1.3500 (high 1.3496) and thus we are not moved too far removed from levels seen this time yesterday. Ahead of the FOMC and US GDP at the end of today's session, month end coming up tomorrow and then the NFP on Friday it is difficult to see too much movement in the next few hours.
The FOMC is expected to leave rates unchanged; continuing its very easy monetary policy, and any softening of the GDP will see the dollar come under further pressure. Today also sees the ADP employment details which will be watched as a hint for the likely outcome of Fridays NFP data.
Technically, once again, little has changed.
We need a sustained break above the current level, 1.3485 (50% of 1.4939/1.2041) and then 1.3500 in order to make any real progress, with the next target being 1.3547 (2 Dec 11 high). Beyond that, the longer term target is at 1.3820 (61.8% of 1.4939/1.2041) which will take a while, and won't be particularly popular in Europe as every policy maker fights for the weakest currency to boost their export markets, and the EU have plenty of competition from both Japan and the US. The G20 lies ahead in the middle of next month (15th/6th) and there looks like being some tension with regards to currency pressures and today's Japanese Press is dismissing the growing international criticism of its Yen policy head on. It should make for an interesting G20!
On the downside, we have been to 1.3413 today, so good bids at 1.3400, and more at 1.3350 and 1.3320 remain intact. The recent 1.3255 low is pretty safe at the moment and would see good buyers if it were tested.
As far as the momentum indicators are concerned the dailies do remain mildly positive for further gains. The 4 hourlies are also mildly positive but look in a bit of danger of running out of steam unless we see some action fairly soon. I think the game plan remains to look for dips for an eventual break of 1.3500, although it looks as though any strength will be a rather choppy process. There are decent stops above 1.3500 though and a break could see an initial swift run towards 1.3550 before the sellers re-emerge.
Keep an eye on the DXY. As I said in the weekend report the Index is looking rather soft. Currently it is at 79.56, down from last weeks close at 79.75 but holding support at 79.35 (200 WMA @79.33). If this is broken we should see an acceleration lower as the index breaks below the large head and shoulders neckline at around 79.25. There will be buyers at 79.00 and towards the double bottom at 78.60. A break of 78.60 seems to me as though we could see a longer term move back towards 74.00, which puts the Euro a fair bit higher but is some way off at present. - On a straight percentage conversion, this would put the Euro up at around 1.44 against the US dollar.
Economic data highlights will include:
EU Consumer Confidence, US GDP, Fed I/R Decision, ADP Employment.
