AUD/USD: 0.9670EUR/USD: 1.3045The U.S. dollar weakness accelerated today against the Euro after the weak U.S. economic data dampened expectations that the Federal Reserve will reduce its monetary stimulus any time soon. The Q1 GDP was revised slightly lower to 2.4% while the Initial jobless claims rose more than expected to 354k and Continuing claims rose 63k. Pending Home Sales were also weaker than expected, and this all added up to keep the dollar under pressure, with the DXY Index having strongly reversed the gains earlier in the week, now back at 83.00 and looking heavy for possible further losses in the next few days.
Technically, we have at last overcome the strong resistance in the 1.2995/1.3005 area and have managed a session close above the 200DMA, now at 1.3020. From here, it could be that we head a little higher still, with the Euro pushing for a move towards downtrend resistance at 1.3075. Above this would see acceleration towards the 100 DMA at 1.3115 and then to minor resistance in the area between 1.3175/90. Above 1.3200 we could test 1.3242 (1 May high) above which I would start to become a little nervous of the medium term bearish view on the Euro that we have previously discussed.
While I think that the immediate trend may be for some continued Euro strength, I suspect that we should probably be using the rally to look for levels to sell into for an eventual turn lower. Right now, I suspect that it is too soon and I can see that 1.3100+ could come under pressure before we head lower once again.
If wrong, and we turn back down immediately, 1.3000/1.2990 is now the immediate support, below which 1.2940 and the 1.2900 will find bids. Back below here would see another attempt at the strong 1.2820 and a break would head towards 1.2800 (17 May low@ 1.2796). Under here 1.2740/70 will continue to see plenty of buyers and I don’t think we are ready for this yet. If/when we do get there, look for further bids at the 50% projection of the decline from 1.3710/1.2744 from 1.3242 at 1.2758 and then the 1.2744 4th April low. Below this there are minor supports at 1.2685 and at 1.2660 but not too much to hold it ahead of the 61.8% projection at 1.2645.
The EU CPI could cause some excitement today, although probably not, and the main focus will be the US data, which is mostly of a secondary nature. Hopefully it will be a quiet end to the week, albeit with the chance of some further dollar weakness. We shall see. Have a good w/e.
Economic data highlights will include:
EU CPI, Chicago PMI, Rts/Michigan Consumer Sentiment, US Personal Income/Spending.
