AUD/USD: 0.9670EUR/USD: 1.3685Following on from the sharp move higher on Thursday, the Euro had a relatively quiet end to the week although it did make a brief attempt to take out the strong 1.3710 resistance by reaching 1.3704 in Europe, before retreating slightly back to where it had it had been previously consolidating, near 1.3680.
Further choppy trade, near current levels could be the case on Monday, ahead of the delayed US Jobs/NFP data (exp 7.3%, +180K) that will be released on Tuesday. With the debt ceiling now lifted until Feb 7, the market's focus will return to guessing when the US Government will begin to wind back the economic stimulus programme. Currently, March 2014 seems to be favoured before any tapering can commence (and with the dovish Janet Yellen running the Fed, it may not happen until later in the year), in which case the US$ will stay under pressure as we run into Christmas, but will be dependent on the string of data, which looks likely to remain soft, following on from the recent Government shutdown. Tomorrow's NFP will give us an early hint.
The debt ceiling issue has merely been delayed for 3 months and could well come back for a repeat performance in January/ February, so it is difficult to see a major dollar recovery ahead of then. However, given the inability of the EU to pick itself up off the floor with any meaningful improvement in its own economic performance, the Euro is not going to run away to the topside. If the Euro does begin to head higher, the ECB will no doubt ramp up the rhetoric about a potential easing of rates to dampen demand for the stronger currency, which, if seen would begin to erode the EU's export advantage..
Technically, 1.3710 (1 Feb high and base of the monthly cloud) remains the first major level to watch. Beyond there would see further sellers at 1.3760 and 1.3810 (61.8% of 1.4939/1.2041).
On the downside, 1.3645 will now be the first support, followed by 1.3600 and then 1.3540.
The 4 hour momentum indicators are overbought and could limit the upside action today. The dailies are potentially picking up some positive thoughts but overall are still fairly neutral and thus I would not have too much of a bias either way in the coming session. There is a bit of secondary data due out today but overall I suspect we may trade a 1.3650/1.3710 range and could tread water before the NFP.
Economic data highlights will include:
M: German PPI, CB Leading Indicator, Existing Home Sales, Wholesale Inventories.
T: US Unemployment/NFP
W: US House Price Index, EU Consumer Confidence
T: EU Council Meeting, EU Flash Mfg, Services, Composite PMI, US Jobless Claims, New Home Sales, Mfg PMI
F: EU Council Meeting, German IFO, US Durable Goods, Rts/Michigan Consumer Sentiment Index.
