EUR/USD: 1.3175Having squeezed up to 1.3084 in Asia, the Euro headed back to its lows (1.0327 ) on the release of the April German ZEW survey that came in at 36.3 (exp 42). The better than expected Spanish Bond auction though ensured that the Euro was well supported at the day’s lows and it has since spent the session squeezing higher, taking out last week’s top at 1.3138 and currently trades at a 7 week high at 1.3200 and looks like it still has legs. The shorts have been badly disappointed and stops have helped to drive the Euro higher.
Other major data on the day included the US CPI which dipped more than expected to 1.5% yy in March, while EU March CPI was as expected at +1.2%. US housing starts were above expectations, increasing 7.0% in March, at 1.036 million, which while helping risk appetite, did little to assist the dollar.
The strong move up in the Euro is a little baffling though, given the disappointing ZEW and that the IMF cut the US growth outlook for 2013 by less than expected today, from 2% to 1.9% as opposed to the expected 1.7%. Chinese expected growth was cut to 8% from 8.2%, while the global outlook is down to 3.3% from 3.5%.
Much of the recovery seems to have come from the cross where Eur/Jpy has jumped 400 points on the day and looks as though it could head back to 130, which would further underpin the Euro.
Technically, the Euro is now quite overbought on the hourlies and 1.3200 looks as though it may keep a bit of a cap on it in the next few hours. The 4 hour charts have turned higher though and appear to be supportive of further Euro gains later in the session. The dailies are beginning to back this up as well, and we may head back towards the Feb 25 high of 1.3319 and the 50% pivot of the move from 1.3710/1.2744 at 1.3225, above which would hint at further gains to the 61.8% objective at 1.3340. There is a lot of work to do before then though, and for the time being I would prefer to maintain a neutral stance as the Euro has me slightly lost as to the reason behind today’s solid move.
On the downside, 1.3140 now provides the first support ahead of 1.3100 and then at today’s 1.3025 low, although this does seem some way off and looks rather unlikely to be seen for at least the next couple of days.
Data today is pretty thin with only EU Construction Outlook and then the US Beige Book to go on. It could therefore be a session pretty much dominated by Yen flows and therefore I would remain rather neutral and use 1.3130/1.3220 as a guide, with a mild preference towards buying the dips.
Economic data highlights will include:
US Beige Book
