AUD/USD: 0.9480EUR/USD: 1.3390The euro hit a four-month high versus the dollar after German ZEW survey rose to 38.5 from 36.4 in May, suggesting that the economy is on track for a modest recovery. The survey for the EU also improved to 30.6 beating expectation of 29.4 and in doing so helped the Euro to take out the large option barrier being protected at 1.3400.
Later in the day, the US data saw headline CPI climb to 1.4% yy in May while the core figure remained unchanged at 1.7%; both in line with expectation. Housing starts rose less than expected to 914k in May.
We now await today's FOMC decision with the market nervous but seemingly mildly confident that Bernanke is going to calm market fears of an imminent winding back of the asset purchase programme and that the current policy will remain unchanged
Technically then, the slow grind higher for the Euro continues, although there is some bearish divergence on the 4 hour charts and there is plenty of selling interest at current levels and all the way up to 1.3450.
The immediate levels to watch are at 1.3435 (100 Month MA), 1.3445, (descending trend resistance) and 1.3450 (200 Week MA).
Above 1.3450, stop losses will be triggered which would take us to 1.3475 (61.8% of 1.3710/1.2744) above which would see an acceleration towards the 13 Feb high at 1.3520.
On the down side, there is now support at the rising trend support at 1.3360. Below here would head towards 1.3300 which looks reasonably safe for the time being, but if taken out, stop loss selling would suggest further declines towards 1.3250 (23.6% of 1.2796/1.3389). Under this, further points to watch would be at 1.3200 and then 1.3160 (38.2%).
Wait for the FOMC before diving in to the market, there is little point tossing a coin before then, although I think as long as we remain below 1.3450 there is a chance of the Euro turning back to the downside. Above 1.3450, I suspect we continue to higher ground.
Economic data highlights will include:
FOMC, Fed IR Decision
