AUD/USD: 0.9140EUR/USD: 1.2915Despite the US holiday, the dollar and equities made strong gains today, particularly against the Euro and Sterling, after the respective Central Banks were both pretty downbeat in laying out a dovish outlook at the their monthly IR meetings.
In the case of the Euro, although rates remained unchanged, Mario Draghi indicated that "the Governing Council expects the key ECB rates to remain at present or lower levels for an extended period of time." and went on to say that there had been "extensive discussion about a possible rate cut".
The Euro quickly fell from above 1.3000 to 1.2882 on his comments, since when it has stabilized above 1.2900, where it is now likely to sit until the NFP /US employment (exp +165K/7.5%) data later in the session.
A strong number would most likely see the dollar make further gains, with the Euro likely to head lower, as shown by the downside momentum which is building in the 4 hour charts. The first point to watch on the downside, below the 1.2882 session low, will lie right ahead at the 50% Fibo support of 1.2042/ 1.3710 at 1.2876. This could prove strong, but a break would head to the weekly cloud support at 1.2840 which should also prove to be strong. Below here, 1.2796 comes into play and, and once again, this should be solid support having been the 17 May low, from where it bounced to 1.3415. This 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, eventually to around 1.1700, - and if we close below 1.2800 today after the NFP, on a weekly basis, then the northern hemisphere summer might not be so quiet and rangebound after all!!
On the topside, declining trend resistance at around 1.3000 will act as the first hurdle (1.3010: 23.6% of 1.3415/1.2882) above which the Euro could head back towards 1.3085 (38.2%) and 1.3150 (38.2%) but looks rather unlikely.
Wait and see the outcome of the NFP. I still prefer the Euro to head lower, but there are some decent levels of support on the downside so I don't think progress is going to be that easy.Selling rallies seems to be the way to go though.
Economic data highlights will include:
German Factory Orders, US Unemployment/NFP
