EUR/USD: 1.3155The Euro broke higher today after more solid German data which saw Industrial Production climb 1.2% m/m in March (vs exptd -0.1%) and which has put talk of further easing from the ECB on hold for the time being.
The data came on top of the news, earlier in the session, when the China Trade balance surplus of $18.16bln was better than expected and generally helped the mood in risk appetite. This has been seen in the equity markets which continue to reach new highs and saw demand for the Euro head briefly up towards 1.3200 before a mild retreat. The Dax hit an old time high today, as did the S+P and the Dow, which is now established above 15000.
It is Ascension Day today so it could be that it will be a bit of a quiet one in Europe, with Germany and France both closed, although we do get the ECB monthly report today which will be the focus and is unlikely to be overly bullish.
Having broken higher, the Euro has finished the US session right on the 100 DMA at 1.3155 which has previously proved tricky to overcome on a sustained basis, but if the Euro can regain today's highs, and then take out 1.3200, the positive momentum that appears to be growing, would take the Euro towards 1.3225 (50% of 1.3710/1.27440). If the Euro can take out the May 1 high at 1.3242, there is not an awful lot to stop it heading to the 25 Feb high at 1.3325. I don't think we should be getting too carried away though at this stage on the topside and more likely we will continue in the choppy sideways trade within the 1.30/1.33 area for some time to come and thus any strength will most likely present selling opportunities for a return to lower levels.
Although Germany appears to be on the right path, the rest of Europe is a different matter as the recent PMI's continue to suggest and the chances of an ECB rate cut have not completely disappeared. We could see a turn back lower at any time and bids would now be seen at 1.3100 and below here at the rising trendline at 1.3080. Below this, 1.3055, 1.3025 and 1.3000 will all slow any fall in the Euro.
All up, I am not sure that we are going anywhere too far in the coming session, but it does look as though dips will be buying opportunities, although if you could find 80 points profit out of it, it would probably be worth taking.
Aside from the ECB report, keep an eye on today's China CPI to provide some direction
Economic data highlights will include:
ECB Monthly Report, China CPI.
