AUD/USD: 0.9250EUR/USD: 1.3125The Euro has turned higher late in the session after being under pressure for much of the day as the combination of Chinese growth and liquidity problems and uncertainties over Fed tapering saw a flow of funds into the dollar, while equities remained under pressure. US 10 Year yields shot higher once again, today reaching 2.66%, before returning to close at 2.55%.
The pressure on the Euro was eased somewhat after Fed board members Kocherlakota and Fisher attempted to suggest that markets had over-reacted to the FOMC decision and sought to reassure traders that the Fed is not about to tighten. This saw Euro short positions being covered as it headed towards session highs,while equities and bonds also recovered from their lows.
The earlier data from Europe, the German IFO came in pretty much as expected at 105.9 and had little effect.
The Euro has therefore managed to climb back from its 1.3058 low, to a high so far of 1.3143 (23.6% of 1.3415/1.3058) and currently sits pretty close to the weekends closing levels, but in the short term at least, is looking as though it has a little more potential to the topside for a possible test of 1.3200.
Despite briefly breaking the 1.3075/85 support as the Euro headed lower, it was only down at 1.3058 briefly and thus the support remains largely intact. The bullish divergence in the hourlies suggests that if today's high can be taken out, there is a good chance of a run towards 1.3194 (38.2%) and possibly even towards 1.3236 (38.2%) and 1.3277 (61.8%). With the 4 hour charts also turning a little higher, it may be that for the session to come, buying the dips is the way to go.
If wrong on this and we head lower from here, there will be good bids again in the 1.32/75/80 area and then at the days low at 1.3058. Below here will find bids at 1.3032 (61.8% of 1.2796/1.3415) and 1.2936 (76.4%), ahead of 50% Fibo support at 1.2870 (1.2042/ 1.3710). I would be surprised to see the Euro below 1.3050 today and wold prefer to buy short term dips if we do see it, with a SL under 1.3000
There is a fair bit of data to drive it around but the US Durable goods will be the main feature. While I suspect the short term may lead to slightly higher levels, the dailies are pointing lower and I maintain the longer term view of selling rallies towards 1.3200/50, looking for another run towards 1.3000 and back to 1.2800 should not eventually be ruled out.
Economic data highlights will include:
US Durable Goods, Case Schiller House Price Index, Consumer Confidence, New Home Sales, Richmond Fed Mfg Index.
