AUD/USD: 0.9450EUR/USD: 1.3520Talk that there might be some progress in negotiations between the Republicans and the Democrats over the US debt issues has seen the dollar recover today. The Republicans have said that they would propose legislation for a short-term debt limit increase to avoid a U.S. debt default, although this would be dependent on an offer by the Democrats to start negotiations over the ongoing fiscal issues that have closed all government operations.
For its part, the Euro has had a choppy but rather directionless session, underpinnned by strong bids in Eur/Jpy, and is currently unchanged since this time yesterday. It could be that it continues to tread water today, in the hope that further progress is made in Washington over the weekend, and there is little else to go on, with Most US data having been postponed. From the EU, the German CPI data will be the highlight.
The technical points remain pretty much unchanged, and below 1.3485, the Euro should see bids at 1.3460 (minor) and then 1.3437 (38.2% of 1.3144/ 1.3645). Below that would head towards 1.3370, where it sat before last month's surprise FOMC decision by the Fed to sit on their hands and to delay tapering.
On the topside, above 1.3540, we would now head back into the consolidation area below 1.3600. Above there, 1.3610 and 1.3645 will see sellers, and 1.3660 resistance remains intact (4 Feb high) and will provide offers ahead of the topside target of 1.3710 (1 Feb. high). Beyond there would see further sellers at 1.3760 and 1.3810 (61.8% of 1.4939/1.2041) which currently remains some way off.
It would not surprise to see a gap open one way or the other on Monday, dependent on whether there is /is not a deal in Congress that can be manufactured over the weekend. It would therefore be wise to be square before the end of the day's trade.
Look for 1.3480/1.3560 to cover it today with direction dependent on the sound bites coming out of Washington and with much of the action likely to be dominated by flows in Eur/Jpy.
Economic data highlights will include:
German CPI, Wholesale Price Index, Rts/Michigan Consumer Sentiment
