EUR/USD: 1.2845While much of the market remained closed for Easter, the Euro initially declined to 1.2770 in very thin conditions, on negative news coming out of Cyprus, from where it was suggested that depositors at the Bank of Cyprus could lose up to 60% on deposits of over EUR 100K. A late recovery has since followed, resulting from weak US data where the ISM manufacturing index dropped to 51.3 in March (exp 54.2), the lowest reading in 4 months.
Markets will now begin to focus on the ECB IR decision on Thursday, where no change is expected, although close attention will be paid to the Press Conference for comments on the EU growth outlook and on the future of Cyprus. The continuing political deadlock in Italy should ensure that any potential Euro upside will see plenty of keen sellers which will cap rallies.
Friday sees the US Unemployment (exp Unch, 7.7%) and NFP data (exp +200K), so it will be a volatile end to the week.
Technically, having spiked briefly up to 1.2867, there are going to be some decent offers at around current levels as the Euro is back near the top of the channel. This may cap it although the 4 hour charts have some positive momentum and if we can break to the topside we should run towards the 1.2890 pivot, beyond which the Euro would head to 1.2970 (23.6% 1.3710/1.2750). The upside does seem the path of least resistance in the short term, although the dailies are yet to show much sign of life.
Below today's lows, the 27 March base at 1.2750 will see buyers ahead of 1.2700 and the important 1.2680 support (61.8% of 1.2042/ 1.3710, and the base of the weekly Kumo cloud). I think it unlikely that we are going to see this in the next couple of sessions.
For today I suspect we can look for a return towards 1.2900, and dips to 1.2820 look as though they may be buying opportunities, with S/L placed under 1.2800.
Economic data highlights will include:
M: German CPI
T:
W: ECB I/R Decision, EU PPI
T: Retail Sales
F: US NFP, Unemployment
