AUD/USD: 0.9075EUR/USD: 1.3075The Euro continued to gyrate below the week's highs following Bernanke's midweek inspired sell-off of the dollar, with the Euro easing back on the combination of Fitch cutting France's credit rating on Friday, and the Portuguese opposition calling for a re-negotiation of the bailout package. The Euro headed back below 1.3000, briefly, although it later recovered as the US$ came under some pressure when some dovish comments from the Fed's Bullard, suggesting that economic growth remains extremely sluggish, hit the wires. The Rts/Michigan Consumer Confidence survey did little to help the dollar bulls, coming in beneath expectations and adding weight to the thought that any QE tapering is still some way off.
Technically, having blown the Euro shorts away, the market is now rather tentative and does not appear very sure which way to go. Having peaked at 1.3200 after Bernanke's speech, before falling back to 1.3000 on Friday, it looks as though conditions are generally going to remain choppy for the next few days, probably until Bernanke's testimony before Congress on Wed/Thur. If he continues with the very dovish rhetoric then we can expect another run higher, but if he surprises the market by being slightly less so, the Euro could see an equally sharp fall. In the meantime, 1.2950/1.3200 looks to be the range, and for the time being I think we should concentrate on this, as the market continues to regain its feet. The dailies have turned higher and in the short term, buying dips appears to be the best way forward, but having closed right on the 200DMA it would not surprise to see this continue to act as a magnate.
The hourly charts do look as though they could be forming a bullish flag and thus, if the Euro can make headway and overcome last weeks 1.3200 area, I guess that it is possible that we could make out way back towards 1.3415 (19 June high) but if seen, I would be looking to sell with a tight SL above 1.3450. I cannot see really what would drive the Euro up here and given that the weekly and monthly charts remain flat, I suspect that we will continue to gravitate near 1.3000 as the northern hemisphere holiday season brings on a general lack of interest.
Economic data highlights will include:
M: US Retail Sales, Business Inventories, NY State Mfg Index
T: EU CPI, EU/German ZEW Survey, Trade Balance, US CPI, IP, Capacity Utilization
W: US Building Permits, Beige Book, Bernanke testimony to Congress
T: EU Current Account, US Jobless Claims, Philadelphia Mfg Index, Bernanke testimony to Congress
F: German PPI
