EUR/USD: 1.3030A little sanity returned to the market today following the rise of all risk assets in the previous session, despite the IMF lowering their outlook for global growth.
The Euro, having earlier reached 1.3200 has now returned to levels that were seen after the poor ZEW data of the previous session, declining sharply after ECB Governing Council member Jens Weidmann said that the ECB may cut rates if economy continues to weaken. The move lower began when another ECB Executive Board member, Lorenzo Bini Smaghi suggested that the Bank should find ways to stop the euro from gaining strength due to the poor growth outlook in the EU. It sounds as though the ECB are lining the market up for a rate cut and that the pressure should now remain to the downside for the Euro.
In the absence of any other data, the market decided to concentrate its focus today on a 10.3 % decline in March European car sales, which look set for a sixth straight annual decline to a two-decade low. Keep an eye on Copper, a good barometer of economic growth, which fell another 3.9% today and maybe the best hint that we have of an impending ECB cut.,
Technically the Euro is currently hanging on to 1.3000, having declined faster than I had thought might be possible yesterday, in what has in-fact been the single biggest one day decline in about a year. A break of 1.3000 would take us to the 50% pivot of 1.2744/1.3200 at 1.2970, 1.2920 (61.8%) and 1.2850 (76.4%).
On the topside, there will now be sellers at 1.3100, 1.3140 and at 1.3200, although the upside looks a little unlikely to see too much strength as the 4 hour charts have turned sharply lower. In the shorter term, the hourlies are very oversold and it looks like being another quiet session in Asia, and possibly Europe, to allow them to unwind. We then have the beginning of the G20 in Washington once the US opens, which will see the market hanging on the wires for any press statement. Also of note will be the Jobless Claims which will be closely watched following the recent miss by the NFP data.
It should be noted that the dailies are not yet suggesting any major move lower and thus it may be that we have some more choppy action ahead of us and if 1.3000 does hold, then we are going to remain within the recent 1.30/1.32 area for the time being. Right now, the pressure looks to be to the downside and I still prefer the idea of selling into strength for an eventual look at 1.2900 and possibly lower.
Economic data highlights will include:
G20 Meeting, US Jobless Claims, Philly Fed manufacturing Survey
