EUR/USD: 1.3060It has been pretty much a rangebound session today with the market closely focused on the movement of $/Jpy and whether it can break up through, 100.00, which it so far failed to do.
The Euro headed a little lower to 1.3014, helped by stops in Euro Yen and by comments from the ECB's Constancio, who said that the EU economy continues to show signs of weakness. This again raised prospects of a rate cut, despite other ECB board members saying that it is still too early to cut rates. The Euro later recovered to roughly where it started as $Yen and the US equity markets recovered from their lows following the lower than expected US existing home sales data.
The EU PMI data, coming later in the session will be closely watched, to provide a hint of a possible rate cut, as will the German IFO later in the week and will be the main driver today.
In the meantime, nothing has changed from a technical perspective and it looks like we are going to continue to drift sideways, at least until the economic data, which actually starts in Asia with the HSBC China Manufacturing figure..
If the data is generally weak, a break of 1.3000 would take us to 1.2970 (50% pivot of 1.2744/ 1.3200) and below this would target 1.2920 (61.8%) and 1.2850 (76.4%).
If it goes the other way, the topside will see it back at 1.3100, and possibly up to the resistance at Friday's high at 1.3127, which coincides with the base of the daily Kumo Cloud and should be strong. Above here would head to the 100 DMA at 1.3150 and then possibly on to the double top at 1.3200. It would take some pretty strong data to take it beyond there and I suspect that the never ending saga that is Italian politics will begin to weigh on any further gains.
The hourly charts are now pointing a little higher, but further out, little has changed, and thus another day of 1.30/1.31 may be in store. I still suspect that rallies will provide an opportunity to get short and the bias remains that at some stage during the week, we may take a look at 1.2950 and possibly 1.2900/20. It could be a slow affair though, and if US$/Yen does break 100, the Euro will be underpinned on the cross, which would delay any downside potential.
Economic data highlights will include:
EU flash Mfg PMI’s, US flash Mfg PMI, US New Home Sales, Richmond Fed Mfg Index.
