AUD/USD: 0.9430EUR/USD: 1.3580The market remained stagnant on Monday, with the dollar rangebound against the Euro as the U.S. government shutdown entered a second week with few signs of a resolution and with traders now eyeing on the possibility of a U.S. debt default. On the face of it, the dollar has held up reasonably well given that the weekend saw no progress at all between the two sides of the US budget debate, but equally the Euro saw little reaction to the EU Sentix Investor Survey which reported a much weaker than expected +6.1 (exp +8.). If the US debt impasse continues, one cannot help thinking that this could be the calm before the storm, but at this stage, with no change at all from the weekend outlook, and with the added possibility of an imminent US default, the currency markets appear to be taking it all in its stride.
For the time being, from a technical point of view, 1.3600 continues to cap the topside. Having failed above here last week, any further near term squeeze towards the recent high of 1.3645 maybe a selling opportunity, looking for an eventual break down below Fridays session low of 1.3537, towards support at the previously mentioned 1.3500/20 area, which should see some strong bids. The first Fibo support is now at 1.3515 (23.6% of 1.3104/ 1.3645) and below 1.3500 would head towards minor support at 1.3475 and then towards 1.3437(38.2%). Nearer to the mark, the Euro is currently sitting on the rising trend support, which could well continue to underpin it, ahead of today's session spike low due to a rumour of a US Government debt deal, of 1.3542.
If this outlook proves incorrect and the Euro strength returns to continue its more dominant uptrend as the dollar succumbs to the ongoing standoff in Congress, then above Thursday’s 1.3645 high would head on to the 1.3710 target (1 Feb. high). Ahead of this, resistance at 1.3660 remains intact (4 Feb high) and, at least in the coming session, 1.3700/10, is looking difficult to attain. If wrong, beyond would see further sellers at 1.3760, after which we should look for a run towards 1.3810 (61.8% of 1.4939/1.2041).
The 4 hour indicators are still pointing a little lower, while the dailies are somewhat overbought and appear to be rolling over. I would therefore prefer to trade from the short side but a fairly neutral stance is probably best, given the chaos in the US.
For the time being use 1.3530/1.3615 as a guide.
Economic data highlights will include:
German Trade Balance, Factory Orders, US Trade Balance
