AUD/USD: 0.9100EUR/USD: 1.3385The Euro finally reached 1.3400 today, just, rallying for the 5th consecutive session as the dollar remains under pressure due to the uncertainty over when the Fed might begin to taper its stimulus programme, and not helped by conflicting comments from various Fed board members.
It is not just the Euro that has made gains, and the dollar index (DXY) has again lost ground today, breaking support at 81.00 in falling to a low, so far, of 80.86, and seemingly heading towards the next support level at 80.49 (19 June low).
The Euro rallied today, despite an ECB report indicating a likely contraction in EU economic growth in 2013, of -0.6%, compared to the previous outlook of -0.4%. Elsewhere, the German trade balance for July was slightly improved at +15.7 Euro bio (+14.9 bio expected), while in the US, weekly Initial jobless claims rose 5k to 333k, slightly below expectations.
Technically the Euro has now approached the bottom end of the strong resistance in the 1.3400/30 area. Above 1.3400, the points to watch are at 1.3405 (200 Week MA) and then 1.3415 (19th June high). Further good offers would arrive at 1.3430 (100 Month MA) and therefore should be difficult to overcome at first attempt. Above 1.3450 would open the way to the Feb 13 top at 1.3522 and possibly to the 1 Feb high at 1.3710.
The momentum indicators are generally pointing mostly higher, although they are potentially showing signs of becoming a little stretched on the topside. It would appear that we should stay with the Euro for now, although I suspect that selling into strength towards 1.3420/1.3440, with a SL left above 1.3470, may be a good risk reward trade for a possible correction lower, at least at the first attempt. I would not want to be caught short if we do head above 1.3470 as I suspect there will be plenty of SL and fresh buying up there, which could drive it quite sharply higher
If we turn lower from here, the points to watch are now at 1.3350 (minor) and then at the rising trend support at around 1.3310. Below here would head to Fibo support at 1.3245 (23.6% of 1.2742/1.3400) and then 1.3150 (38.2%).
There is little data of importance out today - China excepted - and it could be a relatively quiet session. Use 1.3330/1.3430 as a guide .
Economic data highlights will include:
US Wholesale Inventories
