AUD/USD: 0.9310EUR/USD: 1.3485After the markets generally remained relatively rangebound , the coming week will be a big one with plenty of data out, culminating with the US Jobs data on Friday, which will give us added guidance as to when we might expect tapering to begin, with December still viewed as the most likely outcome.
There will be plenty to trade on before that though with the Manufacturing PMI's coming into early focus on Tuesday, and today will see the EU CPI and German Retail Sales data.
We need to keep an eye on what the US Government are up to, and the possibility that it might be shut down by as soon as tomorrow. With none of the Republicans supporting the bill on Friday to fund government activity, things are looking precarious and if the standoff continues, will not be supportive of the dollar. Congress must pass a short-term budget by midnight on Monday in order to avoid a shutdown. Watch this space!
It is not just the US Government that is in strife, with Italy also in trouble, and it appears that the Government there is about to collapse after all five ministers in Berlusconi’s party resigned from the government coalition over the weekend. This could see the Euro come under pressure early in the week, so keep an eye on how things progress.
From a technical perspective, the US$ looks as though it could remain under pressure over the next few days, although at this stage the momentum indicators suggest that we are likely to remain reasonably contained within the recent range. The DXY (Dollar Index: 80.27) charts have both the daily and weekly oscillators pointing lower and I suspect a test of the 200 WMA at 79.82 could be on the cards. This would take the Euro beyond the current minor resistance at 1.3565 to 1.3600 and possibly higher, for a test of the 1 Feb high at 1.3710. It would probably take a weak US NFP on Friday, and the consequent doubts that there will be any December tapering from the Fed, to set this into action.
On the downside, the support looks to be strong at around 1.3480, but if the EU data is weak (or the Italian Government collapses altogether), ahead of the ECB Rate decision on Thursday, we could potentially see a fall below minor support at 1.3450 (daily Tankan) towards 1.3375 (23.6% of 1.2753/1.3568).
For the time being, more of the same rangebound trade appears to cover it but I think that buying dips is probably the way to go for an eventual run to the topside. Overall though, a fairly flexible stance is required.
For today look for 1.3450/1.3550 to cover it, with the early trade looking to be pressured to the downside.
Economic data highlights will include:
M: German Retail Sales, EU CPI, Chicago PMI, Dallas Fed Mfg Business Index
T: German/EU Unemployment, EU Mfg PMI's, US Mfg PMI, ISM Mfg PMI, Construction Spending
W: EU PPI, ECB IR Decision/Press Conference, US ADP Jobs Data,
T: German Unity Day, EU Services/Composite PMI's, Retail Sales, US Initial Jobless Claims, Factory Orders, ISM Non Mfg PMI
F: EU PPI, US Unemployment/NFP.
