AUD/USD: 0.9510EUR/USD: 1.3515The late session Senate announcement has see the dollar give up some ground and it looks as though it is going to remain pretty choppy. Overall though the technical levles to watch remain pretty much unchanged, as per below.
The Euro today fell back below 1.3500 to a low of 1.3480 against a generally firmer dollar, which was lifted by hopes that a deal to reopen the U.S. government and raise the borrowing limit could be close at hand. Nothing has been finalised yet, although the Senate Leader Harry Reid, a Democrat, said he and his Republican counterpart had made "tremendous progress" in talks. He went on to suggest a deal could come as early as Tuesday. If nothing eventuates, we could then see a turnaround in the dollars fortunes as the Thursday debt ceiling deadline approaches. Another matter that would keep the dollar from making further gains would be the likelihood that the Fed would be unable to begin tapering in the next month as the economy begins to slow in the face of further inaction by the government.
Earlier data, which was more or less ignored, saw the German ZEW economic sentiment index rise by 52.8 ( 49.6 exp)
The charts are showing that the Euro has increasing downside momentum, but the strong support at 1.3480/00 is holding, and until any deal is put together in Washington it is difficult to see the dollar making any further significant gains. Below 1.3480 though would see a decline towards 1.3437 (38.2% of 1.3144/ 1.3645 under which it would head to 1.3400 and on 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, which could come back into focus if the current standoff continues, we would see a reverse back to short term resistance, now at 1.3520 and again at 1.3570. 1.3600 has proved a hurdle too many so far this week, but if taken out, the Euro would head on towards 1.3645 and then 1.3660 (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.
For the coming session I suspect we hang close to current levels, although the hourlies are a little oversold and we could see a squeeze to slightly higher levels, which I would use as a sell opportunity for the greater move lower that is suggested by the momentum in the longer term charts. Use 1.3540/1.3480 as an initial guide.
Economic data highlights will include:
EU CPI, Trade Balance, US Beige Book
