AUD/USD: 0.8955EUR/USD: 1.3300After better than expected US data, that saw the dollar strengthen on the back of the 1.7% expansion of the 2Q GDP and the 200K rise in July U.S. private sector jobs growth, which added 200,000 jobs, the FOMC statement finally arrived and did nothing to hint as to when tapering of the stimulus programme might commence. The Fed said that it would continue to buy bonds to stimulate the economy, adding that policy would still remain loose once the stimulus programs end, but gave no clue as to when this might be. We will get more of an idea Friday after the release of the Jobs/NFP data, which if it takes its cue from today's strong ADP reading, could see further dollar strength as the market does begin to eye the possibility of tapering on the horizon.
The FOMC statement saw the dollar immediately lose its earlier gains and the Euro turned higher, breaking through the 1.3300 barrier, to a high so far, of 1.3344.
Earlier data from the EU was mixed with EU CPI at 1.6%yy (as expected), while German Retail Sales for June fell by 1.5% (expected flat). German Unemployment was steady at 6.8% while the overall EU rate came in at 12.1% - steady.
This all comes in ahead of today's ECB Interest Rate decision/Press Conference, and if Mario Draghi is once again overly dovish, then we can expect the current rally in the Euro to quickly run out of steam.
Having broken through the offers at 1.3300, the Euro is now homing in on the descending trend resistance, currently at around 1.3350, a break of which would see a run towards 1.3405 (200 Week MA) and more importantly the 1.3415, the 19th June high. A break through here would find further offers at 1.3430 (100 Month MA) and thus the 1.3400/30 area should be pretty strong at first attempt. A break would see a squeeze towards 1.3500 but I cannot really see this unless the NFP comes in as a very weak reading.
On the downside, back below 1.3300 would see the Euro back in the 1.32/1.33 congestion of recent days, with today's low at 1.3208 being the first port of call (23.6% of 1.2753/1.3344). Beyond that would see a run towards 1.3175, but this looks unlikely - at least before Friday's data.
One thing to note, is that, although the price of the Euro is steadily rising, the indicators are showing growing bearish divergence, and therefore selling into the 1.3400/30 area could be a plan for a turn lower, with a tight stop placed above 1.3450.
Look for a choppy day, with the ECB Press Conference being the focus, but before then we get the official China Mfg PMI followed by the EU PMI's which will provide some volatility, as will the US ISM, later in the day.
Economic data highlights will include:
EU Mfg PMIs, ECB IR Decision/ Press conference, Jobless Claims, US Mfg PMI, Construction PMI, ISM Mfg PMI
