EUR/USD: 1.2888In the absence of Europe there is not too much to report today apart from some slight selling of the dollar ahead of the FOMC Minutes and Bernanke's testimony, due on Wednesday (early Thursday, Asia).
The Feds Evans, has been speaking and has indicated that he would be amenable to tapering of the current QE programme, if he could be confident that the labor market were continue to improve. The fact that one of the 'doves' at the Fed, with regards to monetary policy, is prepared to consider some winding back of the current policy has put a bit of a cap on the dollar selling, and in the case of the Euro it has reached a bit of an impasse just below the day's highs of 1.2900.
Until Wednesday it would appear that we could be largely on hold and today's data, with the highlight being the German PPI, will give us very little to go on. The Fed's Bullard will be today's "talking head" and the market will search for any hint for direction in what he says with regard to QE.
In the meantime, little has changed for the Euro from a technical perspective.
On the downside, reasonable support in the area of 1.2820/1.2800 remains intact and for the time being I think that will remain the case.
If wrong, a break would head quickly towards the 1.2775 neckline of the potential head/shoulders, which if it develops, could eventually take the Euro down to an objective of around 1.1700. Don't expect any action on this front for quite a while, but I still remain of the view that it will eventually be the outcome. Below 1.2775, further bids would arrive at the 50% projection of the decline from 1.3710/1.2744 from 1.3242 at 1.2758 and then at the 1.2744 (4th April low). Below this, there are minor supports at 1.2685 and at 1.2660, and beyond there; further bids will arrive at the 61.8% projection at 1.2645.
If we continue to see a near term move out of the dollar before Bernanke/FOMC, we could see a squeeze up to 1.2990, which will be major resistance given that this is where the 200/55DMAs are crossing and is also the 50% pivot of 1.3193/1.2795. Before then, minor resistance is to be seen right here at 1.2900 and then at 1.2945 (38.2% of 1.3193/1.2795). A break above 1.3000 would see acceleration towards 1.3040 (61.8%), but looks doubtful.
The shorter term indicators do suggest a slow squeeze higher today and for now I would prefer to play it for the long side. However, the dailies do point lower, and later in the week a retest of the support at/below 1.2800 would not surprise, meaning that rallies towards 1.2950 -ish, probably present good selling opportunities.
Economic data highlights will include:
German PPI.
