EUR/USD: 1.3450The Euro traded in choppy fashion on Tuesday but has ended up at the top end of its daily range after ECB President commented that there is no such thing as a “currency war” and comes ahead of the approaching weekend G20 meeting at which exchange rates are likely to be the centre of attention. He also mentioned, in a speech to the Spanish Parliament that Spain is heading in the right direction in order to get its economy growing again and that he sees signs of some EU growth in the second half of the year.
Earlier in the day, a statement was released by the G7 that stated: “We, the G7 Ministers and Governors, reaffirm our longstanding commitment to market determined exchange rates and to consult closely in regard to actions in foreign exchange markets. We reaffirm that our fiscal and monetary policies have been and will remain oriented towards meeting our respective domestic objectives using domestic instruments, and that we will not target exchange rates.” That seemed pretty clear, but later an unnamed G7 official said that the statement had been misinterpreted and only added to the confusion of recent comments on the FX markets.
Technically the Euro continues to squeeze a little higher to 1.3475, having taken out resistance at 1.3435 but has so far fallen short of 1.3487 (38.2% of 1.3710/1.3353). Short term momentum remains positive, but further gains are probably a bit limited ahead of the G20, and the concerns remain over the Cyprus bailout as well as the Spanish political scandal and a possible negative reaction to the Italian election on Feb. 24-25 if Berlusconi remains in the mix. If the Euro does make further gains, the topside would see further sellers at 1.3530 (50% pivot of 1.3710/1.3353) and then at 1.3570 (61.8%).
Although the short term indicators are pointing higher, the dailies do not look quite so sure and if we do see a move lower, support would now be seen at 1.3400 and then at 1.3360 which should prove quite strong. I would doubt that we are going to see this today, but if wrong, a break would head towards congestion at round 1.3300.
Today’s focus will be the US Retail Sales and Obama’s State of the Union Address, which will occur in the Asian time zone. With Chinese New year still in full swing, Asia should again be fairly quiet.
Look for 1.3400/1.3500 to cover it.
Economic data highlights will include:
US Retail Sales
