EUR/USD: 1.3563The Euro finally broke higher today breaking above the resistance at 1.3500, helped along by improved EU economic sentiment that rose by a better than expected 89.2 in January from 87.8 in December. The ECB's Nowotny helped the cause by commenting that the Euro was rising due to the outlook in the EU. Later on, Q4US GDP was much weaker than expected (+1.2%), shrinking by -0.1% and kept the pressure firmly on the dollar.
The FOMC has just been released with the Fed doing the expected and keeping the $85bio QE per month in place. The statement sounded a little more upbeat about future growth and the Fed feel that the employment situation will very slowly improve. Nothing earth shattering there.
Technically the Euro looks strong, not only against the dollar but is also making gains against the crosses. Good progress is being seen against the Yen, Gbp, Aud and Nzd, (although it lost ground against the Chf) and momentum indicates that there is room for further gains ahead.
Against the dollar, then next upside target is at 1.3600 and beyond there at 1.3614 (18 Nov '11 high) and then at 1.3640 (15 Nov 11 high). Above that would see acceleration towards 1.3700, and the 61.8% Fibo target at 1.3820 of the large move down from 1.4939 to 1.2042. The acceleration on the dailies is building and with the momentum indicators pointing higher it would appear that we have some upside ahead of us in the next few weeks.
As I said yesterday,and also on the weekend, keep an eye on the DXY. It is beginning to break down and at 79.29 is now just below the 200WMA and could see acceleration to the downside towards 79.00 and 78.60. If so, the Euro is heading higher, although the 200WMA may prove resilient in the short term to further weakness.
The downside now sees short term support at 1.3525 ahead of 1.3500 and then 1.3485. Below that would head back down to 1.3400 and then to 1.3350 and 1.3320.
The game plan appears to be that dips will continue to provide buying opportunities, although having made some good gains and ahead of the NFP/Unemployment data tomorrow, we may stay in a 1.35/1.36 range today in order to consolidate gains and to allow the short term charts to unwind.
Economic data highlights will include:
German Retail sales, Unemployment, CPI, Personal Consumption, Chicago PMI
