EUR/USD: 1.2970The NFP missed the mark badly and did the dollar no favours on Friday, with the Euro at one stage climbing to 1.3040 as traders rushed to cover shorts. Following on from the poor ADP and Jobless Claims released earlier in the week, a soft result should not have been a surprise, but the final figure of +88K, against the expectation of +200K, saw a mass exodus from the dollar despite the fact that the unemployment rate inched lower to 7.6%, from 7.7 % the previous month, while the Jan and Feb readings were revised upward to show that 61,000 more jobs were added.
Further Euro gains were difficult to come by, as concerns over Cyprus persist and weekend headlines from Lisbon, confirming that the Portuguese constitutional court had rejected some austerity measures in 2013 budget, threatens to become the latest potential landmine for the EU and may hinder any further upside momentum early on Monday.
Focus will now turn towards the minutes of the previous FOMC meeting, due on Wednesday, while the other economic highlight this week will be the ECB Monthly report, due on Thursday. In their weekend report, one of the major US banks published that they expect any comment on QE from the FOMC minutes to be fairly balanced and that the current policy of pumping $85 bio monthly into the economy will continue, despite some of the more hawkish Fed Members suggesting that it should be tapered off sooner, rather than later. After the NFP result, it looks as though the QE is pretty much a necessity, given the potential for slowing economic activity, and we will find out more from the US Retail Sales on Friday. Before then though, the Q1 US reporting season begins with Alcoa's results being released after Monday's stock market close. Expectations of a general slowdown from the previous quarter will add further pressure to the $/US equities.
Looking ahead, on the charts, it would appear that the Euro does have some more upside potential, as the dailies and the shorter term time periods, both have positive momentum. It may be advisable to allow the hourlies to wind back a little before venturing into the market, but another push to Fridays 1.3040 high (and the 25 March high at 1.3050) would not surprise, beyond which we could test 1.3112 (38.2% of 1.3710/1.2745). Above that may be a bit of a struggle, given the shape that the EU is in, with the Italian political standoff and the Portuguese court decision of immediate concern, but further points to watch would be at the 100 DMA (1.3130), 1.3156 (27 Feb high) and 1.3226 (50% Fibo).
While the upside for the Euro looks favorable in the short term, I doubt it will last too long before politics do take over again and put it back under pressure. We are currently sitting on minor support, being the rising trend from last week's lows. A break would take us back to 1.2927 (38.2% of 1.2745/1.3039) and then to 1.2892 (50%) and possibly 1.2856 (61.8%).
The strategy early in the week looks to be one of buying dips, using the short term Fibo levels as a guide. Any political foot-in mouth comments from the EU would mean all bets are off, and on late Tuesday (US)/early Wednesday (Asia) look out for Bernanke who will be speaking.
For Monday look for 1.2930/1.3050 as a guide with a preference to buying dips.
Economic data highlights will include:
M: EU Sentix Investor Survey, German IP
T: Bernanke Speech, German Trade Balance
W: -
T: EU Meeting, German CPI, ECB Monthly Report, US Jobless Claims
F: EU Industrial Production, US Retail Sales, Reuters Michigan Consumer Sentiment
