AUD/USD: 0.9180EUR/USD: 1.3140In the absence of any data to drive the market on Friday, the Euro chopped around either side of 1.3100 before finishing at the higher end of the day's range, supported in part as the US$ eased a little after Bernanke's midweek efforts to sustain a positive risk sentiment, and partly by the surprise news that China will remove controls on bank lending rates for rural credit co-ops’ in order to assist economic restructuring, which in turn should underpin Chinese economic growth.
As the session wore on, the dollar slowly regained some of its ground against most currencies, with Euro unable to make further gains, remaining pressured by the ongoing problems in Italy and Portugal. An IMF statement on Friday that future economic growth could be lower than projected due to stagnation in the Eurozone.
The G20 meeting communiqué offered no real surprises, pledging to move towards banking union in Europe and to adhere to market-determined exchange rates, refraining from competitive devaluations - (which no-one seems to have passed on to the Japanese delegation!). They did promise to place economic growth ahead of austerity, seeking to revive a global economy that "remains too weak", which would seem to me that we could well be in for and EU rate cut and that, as promised by Bernanke, QE is not going to disappear any time soon in the US.
The summer doldrums now appear to be well upon us and the ranges could remain narrow for the next few weeks and technically little has changed and from Friday. This could well continue in coming days as the Euro consolidates below Thursday peak at 1.3177, which in turn lies ahead of last week’s top at 1.3205. A break of this would lead to further gains towards 1.3255 (76.4%) and beyond this, there is downtrend resistance now at around 1.3355, which in turn comes ahead of the 1.3415, 19 June high.
The daily charts are pointing in this direction, as is the DXY, which suggests that we may see a bit more dollar weakness in the next few days. The shorter term charts though, look less certain, so if we do see any progress towards a higher Euro, it may be a rather slow process. There is not an awful lot of data out early in the week, although the EZ PMI's on Wednesday & the German IFO, Thursday, will provide some insight into the strength - or otherwise - of growth in the EU and where it is likely to head.
On the downside the initial support at 1.3085 (50% of 1.3415/1.2753) held again on Friday and this looks fairly well backed up by the 200 WMA at 1.3078. A break lower, which looks a little unlikely in the next day or so, would head towards 1.3035 and then back to 1.3000. Doubtful.
More trade in the 1.30/1.32 looks to be the most likely outcome, but dips for the time being do appear to be buying opportunities for a test and possible break of the topside towards 1.3300.
Economic data highlights will include:
M: Chicago Fed Activity Index, Existing Home Sales
T: EU Consumer Confidence, US Existing House Price Index
W: EU Flash Mfg, Services, Composite PMI, US Flash Mfg PMI, New Home Sales
T: German IFO, US Durable Goods, Jobless Claims
F: Rts/Michigan Consumer Sentiment Index
