AUD/USD: 0.9050EUR/USD: 1.2820The US$ continued its strong run higher following the better than expected NFP data on Friday (+195K, beating expectations of +170K) and it has the Euro struggling to hang on above the recent 1.2796 low. Given the combination of surging US Yields (10 Year : 2.71%, 30Y : 3.67%) and the dovish outlook for the EU, as indicated by Mario Draghi at last week's ECB meeting, it is hard to see the Euro making any real positive headway in the days to come if the market continues to feel that the US economy is finally picking up some steam. There is a fair bit of data out of Europe this week which will give us a further hint of where Europe is heading, but the real focus will probably be on the FOMC minutes on Wednesday, with the market hanging on for any hint as to the possible timing for any tapering of the Feds asset purchase programme.
As far as the charts are concerned, the 17 May low at 1.2796 remains intact, having seen a Friday low at 1.2805. This is where the important neckline currently lies, (as can be seen on the weekly charts, below) and a break could lead to sharply lower levels, where as I have said before the target is at around 1.1700.
Nearer home, initial support will be found at the 4 April low at 1.2744 and below here there is little to hold it ahead of 1.2680 (61.8% of 1.2042/1.3710), which should be strong, and below which would find further bids at 1.2660 (13 Nov low). If/when we get under here, the real acceleration could begin as we head to 1.2586 (Aug 2010 low) and then 1.2435 (76.4% of 1.2042/1.3710). This move is about to get busy I think, so stay alert!!
Rallies now look as though they will struggle above 1.2870 (50% pivot of 1.2042/1.3710), although it is feasible that we may head back to the top of the short term descending channel, currently at 1.2970. I don't really see it happening but stay flexible and allow room for selling into rallies.
The data starts today with a bit out of the EU, which could present us with a short squeeze, particularly if the Sentix shows some improvement ( exp -10), but as I said, the main action of the week will arrive on Wednesday after the FOMC Minutes are released and then later when Bernanke speaks. In the meantime, Draghi will be testifying to the EU Parliament today which may cause further downside pressure to the Euro if he reiterates his dovish outlook for the economy.
Economic data highlights will include:
M: EU Meeting, German C/A, Trade Balance, I/P, Sentix Investor Survey, Draghi Speech, US Consumer Credit
W: German CPI, US FOMC Minutes, Wholesale Inventories, Bernanke Speech
T: ECB Monthly Report, US Jobless Claims
F: EU Industrial Production, US PPI, Rts/Michigan Consumer Sentiment Index
