AUD/USD: 0.9325EUR/USD: 1.3525The Euro is back at Friday's closing levels after having tested 1.3467 in Asia on the concerns over the potential collapse of the Italian Government. Since then the impending US Government shut down has been the focus which has seen the US Dollar come under some pressure of its own and we are now only a few hours away from the first shutdown since 1996. Midnight NY time will set off the trigger and we could see some action in Asia as the dollar gets sold off, so stay alert!
Ultimately there is not a lot of change in the overall situation and for the time being it would not surprise to see the Euro hug reasonably close to 1.3500. Although the US shutdown may provide some jitters it is pretty much expected and one would think, largely written into the price - we shall see. The EU PMI's will be released later on, as will the German Jobs data which will provide the European session highlights but overall, the market will continue to keep a close eye on Washington. US data will focus on the ISM Mfg PMI, in which case the ADP Jobs release on Wednesday may take on increased significance.
Technically little has changed, with month end diminishing some risk appetite and the Euro has largely remained within our daily projected range of 1.3450/1.3550. It could be the same again today, with good resistance still intact at 1.3465 although if the PMI's are better than expected, then we could see this taken out for a run to 1.3600. Beyond there could prompt a test of the 1 Feb high at 1.3710 but as I said yesterday, 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. At this stage there seems to be a good chance that the US Government will be closed and the data would then be postponed.
On the downside, the support remains intact at around 1.3480, but if today's EU data is weak, ahead of the ECB Rate decision on Thursday, where a dovish stance is expected and likely to cap any Euro gains, we could potentially see a fall below minor support at 1.3450 (daily Tankan) towards 1.3375 (23.6% of 1.2753/1.3568).
Overall I don't see the momentum having the energy to push it too far either way today and would use a similar range to yesterday and 1.3475/1.3575 could well cover it, although as I said, be wary of a knee jerk dollar selloff at midnight NY (2pm AET).
Economic data highlights will include:
German/EU Unemployment, EU Mfg PMI’s, US Mfg PMI, ISM Mfg PMI, Construction Spending
