AUD/USD: 0.9145EUR/USD: 1.2980The U$ generally traded higher today, pushing the Euro back bellow 1.3000, after U.S. factory data beat market expectations, reigniting speculation that the Fed will begin to taper its bond-buying program, possibly as early as September.
Having returned to a fairly neutral outlook, the 4 hour charts would appear to be turning lower again, although ahead of the US July 4 holiday and then the NFP on Friday, I would be surprised to see any major move, unless the ECB do something unexpected tomorrow, which is unlikely. I am a little surprised that we have taken out the 1.2985/00 support today, I still think the downside is the way to go, albeit possibly quite slowly ahead of the data later in the week.
A continuation of the decline would suggest a run down to 1.2940 (76.4% 1.2796/1.3415) and then 1.2900, ahead of 50% Fibo support of 1.2042/ 1.3710 at 1.2876 and weekly cloud support at 1.2840. Below here 1.2796 comes into play and should be strong support, having been the 17 May low and is also the neckline of the Head/Shoulder formation that we have been watching for the last few months. A break would see much lower levels, - I suspect to around 1.1700, - but at this stage not worth getting excited about.
On the topside, sellers will now appear at 1.3000, above which would see a return to 100 DMA, now at 1.3057, and then to today's high at 1.3077, above which the resistance is strong. 1.3080/85 (200 DMA / 23.6% of 1.3415/1.2985) will be the first hurdle ahead of 1.3100 which will be difficult to break. If the Euro can make some gains beynd here, which I doubt, then beyond 1.31, would head towards 1.3147 (38.2% of 1.3415/1.2985) and possibly to 1.3200 (50%). Not today I suspect, and although I don't think it is going anywhere too far ahead of the ECB decision, I still think it will be the downside that will prevail
Economic data highlights will include:
EU Services, Composite PMI data , EU Retail Sales, US ADP Employment Change, Jobless Claims, Trade Balance, ISM Non-Mfg PMI
