AUD/USD: 0.9180EUR/USD: 1.3335US Treasuries traded to a 2 Year high on Friday, with the 10 Years peaking at 2.86%, underpinning the dollar, and keeping a cap on the Euro, ensuring another session stuck between 1.33/1.34, with more of the same looking likely early in the coming week given the lack of data due out on Monday.
Fridays softer than expected US data showed that US housing starts rose 5.9% to 896k (exp 905k), while building permits rose 2.7% to 943k ( exp 945k) and ensured that the US$ was unable to make any further gains of its own, so the directionless trade looks likely to persist. The "will they/wont they?" tapering issue is going to be with us for a while, but hopefully Wednesday's FOMC minutes will provide some clarity. If the minutes indicate that the previous meeting saw a growing call from the Fed board members for tapering to commence, it will reinforce the view that it will be as soon as September - either way we will get the inevitable knee-jerk reaction, so be prepared! (early Thursday in Asia).
In the meantime, from a technical stance, the Euro looks much the same as Friday, and really from the last week overall, with 1.32/1.34 providing the wider parameters to trade from and this should hold I think at least til Wednesday.
Once again the resistance at 1.3380 and 1.3400 remains intact, and with the short term momentum that had previously been pointing higher now having run out of a bit of steam, may well continue to do so for the next session or two. If 1.3380 can be overcome, then look for further gains into the expected heavy offers between 1.3400/30. The points to watch are at 1.3400 (200 WMA), above which would see a run into resistance at 1.3415 (19 June high) and then at 1.3435(100 Month MA). Above here would trigger plenty of stops towards 1.3477 (76.4% of 1.3710/1.2753) and then there is not a whole lot to stop it heading back to 1.3710 (1 Feb. high).
On the downside, there will again be bids at 1.3300, with minor support at 1.3270, 1.3230 and then at around last week's lows at 1.3205, where the top of the weekly cloud lies, providing strong support, but which looks unlikely to be seen again today.
In the longer term, the weekly charts may be building up some mild positive momentum, and so without getting too excited about it, I suspect that a test of the upside may eventually be in line, which seems to be backed up by the negative weekly outlook in the DXY (ie lower dollar), but overall, if we see 1.3430 - and all the stops that will lie above there - taken out, it would not surprise to then see the euro turn lower once again, for another run back towards 1.32/1.33. The rising differential in yields is going to be important and if rates in the US continue to head higher, this will ensure that the dollar in the longer term remains well underpinned. There is good resistance at 2.85%, but a break takes us to 3% and would give the dollar in important advantage.
The annual Jackson Hole symposium takes place of Thur/Friday/Sat. It looks unlikely to produce anything earth moving, but has in the past been used to announce changes in monetary policy, so worth keeping an eye on.
Economic data highlights will include:
M:
T: German PPI
W: FOMC Minutes, Existing Home Sales
T: Jackson Hole Symposium, EU Mfg, Services, Composite Flash PMI's, US Jobless Claims, US Flash Mfg PMI,
F: Jackson Hole Symposium, German GDP, EU Consumer Confidence, US New Home Sales.
