AUD/USD: 0.9710EUR/USD: 1.3778The Euro broke through the important 1.3710 resistance today as the dollar slid to a two-year low after the weak NFP which rose by just 148K, against the expected 180K, and reinforced expectations that the Fed will keep its economic stimulus policy intact well into next year. The dollars losses may have been worse but for the fact that the previous month’s figure was revised up to 193k from a previously reported 169k.
10 Year US Yields fell to 2.2525%, the lowest level since mid July and placing further pressure on the dollar.
From a technical point of view, with 1.3710 (Feb 1 high) now out of the way, it would appear that the way is open for a run towards 1.4000. However there are plenty of areas of resistance ahead of that and much work to do to get there. The ECB are unlikely to be happy with the rise in the Euro, and thus we can probably expect to be in for some increased jawboning about the potential for easing rates in the EU in an attempt to stop the Euro from rising too far.
Technically, we are approaching the top end of a potential channel at 1.3815 (session high 1.3792) but once above there 1.3890 will be the next minor point of resistance, beyond which there is further minor resistance at around 1.3920. In the longer term, the Euro has today entered the monthly cloud, which is not broad and which has a top at 1.3955. It has not been above the monthly cloud since Oct 2011, so if we do head above it - on a monthly close basis - the way is potentially open to much stronger gains. We shall see.
On the downside, 1.3710 becomes the first obvious support and below there we will move back into the recent consolidation between 1.3500/1.3680. The first Fibo levels are now to be found at 1.3625 (23.6% of 1.3125/1.3792) and then at 1.3525 (38.2%), both of which look pretty safe for the time being.
The momentum indicators suggest that dips are buying opportunities and it appears as though the US$ will remain under sustained pressure, with no sign of tapering in sight for quite a while.
Economic data highlights will include:
US House Price Index, EU Consumer Confidence
