AUD/USD: 0.9490EUR/USD: 1.3560The holidays in the US have meant that volume has been light, with reduced volatility and with most currency pairs trading within a few points of the weeks opening levels. The US$ came under some mild pressure as the standoff in Washington continues, with the Euro earlier reaching 1.3597 before drifting lower once again as the session wore on, as hopes again increased that something will be stitched together. With the comparative lack of volatility, who would have thought that the US is within a couple of days of going into default? Negotiations in the Senate to solve the crisis have showed signs of progress today, and a White House meeting due at around the NY close has been delayed to allow more time to negotiate. A failure to break the stalemate before Thursday's deadline to raise the debt ceiling will leave the US unable to pay its bills and will have huge ramifications, potentially pushing the US back into recession and bringing the world to the brink of financial meltdown. Let's hope they can get their act together in a hurry! In the meantime every sound bite is being over-analysed for signs of progress and thus trade is likely to be very whippy.
The technical picture for the €/US$ remains pretty much unchanged, with the Euro again capped at 1.3600/10, where it topped out last week. Beyond that, 1.3645 will see sellers and then 1.3660 resistance remains intact (4 Feb high) and will provide offers ahead of the major 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.
On the downside, below today's session low of 1.3545, further strong bids will again be seen in the 1.3500/20 area ahead of last week's lows at 1.3485. More bids will emerge at 1.3437 (38.2% of 1.3144/ 1.3645 and 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.
The 4 hour charts are mildly positive, and the dailies which had been beginning to increase their downside momentum look to be flattening out again, and so, for the coming session 1.35/1.36 could again cover it. I still suspect the Euro is, at some stage, going to head for 1.3400 but until there is some positive news out of Washington it is difficult to see how the dollar is going to make any substantial gains
Economic data highlights will include:
Coffin Meeting, EU/German ZEW Survey, NY State Mfg Index:
