AUD/USD: 0.9085EUR/USD: 1.3005Having headed lower in early European trade after political anxieties increased in Portugal, raising doubts over the ability of the Government to adhere to its bailout commitments, the Euro has recovered to trade at 1.3000 ahead of the NY holiday. as the tensions eased a little after a junior coalition party confirmed that it will continue support the Government.
There is now not an awful lot to go on until the ECB meeting later today, after which it will become very quiet in the absence of NY. With no change expected from the ECB I would imagine that we should not expect too much action today although, Mario Draghi is likely to keep the pressure on the downside with a rather dovish outlook for the EU economy.
Today's economic data from the US showed that initial jobless claims were unchanged at 343k , while the private sector ADP figure jumped to +188K jobs created (exp +160K), raising hopes for a good NFP number on Friday.
Technically there is little change, although the Euro did briefly make it down to 1.2922, taking out Fibo support at 1.2940 (76.4% 1.2796/1.3415). It later recovered, to trade as high as 1.3030 very briefly as the Portuguese tension eased and bond yields turned a little lower, but remains largely within its recent range.
While I don't expect too much action on the downside today, a continuation of the decline to below the Fibo support and then today's 1.2922 low would head to 1.2900, ahead of important 50% Fibo support of 1.2042/ 1.3710 at 1.2876 and then the 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 1.3030, above which would see a return to 100 DMA, now at 1.3050, above which the resistance is strong. 1.3075/85 (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 beyond here, which I doubt, it could head towards 1.3147 (38.2% of 1.3415/1.2985) and possibly to 1.3200 (50%).
I don’t think it is going anywhere too far ahead of the ECB decision, or probably afterwards either in the absence of NY. While I still think it will be the downside that will eventually prevail, the 4 hour charts look mildly positive and we may drift a little higher today, which would present another selling opportunity for an eventual resumption of the downtrend. If Draghi increases his rhetoric about the downside risks facing the EU, expect any upside potential for the Euro to disappear rather quickly.
Economic data highlights will include:
US Independence Day, EU GDP, ECB I/R Decision, / Press Conference
