AUD/USD: 0.9140EUR/USD: 1.3350It has been a wild ride for the dollar over the last few hours, leaving the markets very dazed and confused. The initial reaction to the better than expected US jobless claims (320k v exp 335k) was to buy the dollar strongly, sending the Euro down to 1.3205, only to be followed by a violent turnaround when traders took a closer look at the other data that hinted that any phasing out of the stimulus measures by the Fed may be further off than the improved jobs data had suggested. The Empire State manufacturing index unexpectedly fell to 8.24 in August, while the CPI climbed back to 2.0% yy in July and the core CPI also accelerated, to 1.7% yy.
So, far from doing very little yesterday, we have gone to trading the extremes today and in the middle, very little has changed from an economic point of view and there is no further clarity as to what we might expect from the Fed. Confusion still reigns and depending on which market you look at, you will see a different view on when tapering might begin. 10 Year US yields broke higher, to trade up to 2.83% today and the S+P and Dow have both headed lower, suggesting that tapering is on its way. At the same time Gold and Silver have headed up sharply, to as high as 1370 and 23.18 respectively, on expectations that the Fed will sit on its hands until December. No one knows - especially me!
Technically, it has just been one of those days that have seen levels broken on both sides, and for the time being it would be a brave decision to go in either direction. A medium term view is pointless, so just trade it session by session.
Resistance at 1.3380 and 1.3400 remains intact, but the short term momentum does point higher and if the Euro does make further gains it will run into the strong resistance 1.3400/30.
On the downside, there will now be bids at 1.3300 and again at 1.3270 1.3230 and at around the lows at 1.3205 but which looks unlikely to be seen again today.
The Rts/Michigan Consumer Sentiment Survey is the data highlight today and thus I would imagine that we could be in for a day confined to 1.33/1.34 as there does not seem to be enough to push the major resistance in order to make a break towards 1.3500. Having said that, today will be a big day for option expiries at 10 am NY.
The dailies are giving little hint in either direction, although given the way that the Euro is finishing the current US session, I suspect that buying the dips may be the way tactic for the coming session, but be flexible.
Economic data highlights will include:
EU Current Account, US Building Permits, Housing starts, Rts/Mich Consumer Sentiment Survey
