AUD/USD: 0.9620EUR/USD: 1.3800The Dollar remained under pressure against the European majors today, including the Euro, which was assisted by the better than expected China data earlier in the session and by the news that Spain has pulled out of a two year recession with the Q3 GDP expanding by 0.1%. Later in the day, US data showed that the trade deficit widened to USD -38.8bio in August (although better than the expected -39.5bio), while Initial jobless claims came in at 350k against expectations of of 341k.
The Euro broke through 1.3800, making a 2 year high at 1.3825 where strong resistance lies and despite a quick retreat to 1.3760 it has since recovered in what has overall been a fairly choppy session.
The topside for the Euro was capped in part by generally soft EU PMI data, suggesting that any economic recovery in the EU is going to be a slow and bumpy ride.
EU PMI manufacturing rose to 51.3 in October, Exp 51.4
EU PMI services dropped to 50.9.
German PMI manufacturing rose to 51.5 Exp of 51.4.
German PMI services dropped to 52.3 Exp 53.7.
French PMI manufacturing dropped to 49.5 - Exp 50.1.
French PMI services dropped to 50.2 - Exp 51.3.
Technically 1.3825 (61.8% of 1.4939/1.2041) is going to be tough to break but if /when this happens, then 1.3867 (4 Nov 2011 high) will be the next hurdle, beyond which there is further minor resistance at around 1.3920.
In the longer term, the Euro is in the middle of the monthly cloud, which is not broad and which has a top at 1.3955. It has not been above the cloud since Oct 2011, so if we do head above it – on a monthly close basis, next week– the way is potentially open to much stronger gains. I don't see it happening but we shall see.
On the downside, minor rising trend support is at 1.3780, and below today’s 1.3760 low, 1.3710 becomes the first obvious support. Below there we will move back into the recent consolidation between 1.3500/1.3680 and the first Fibo levels are now to be found at 1.3652 (23.6% of 1.3125/1.3820) and then at 1.3547 (38.2%), both of which look pretty safe for the time being.
The charts are beginning to show signs of becoming a bit overbought so I would not be getting too carried away on the topside unless 1.3825 is overcome. A weekly close not too far from current levels would not surprise in the absence of any major data today and I would use 1.3760/1.3830 as a guide.
Economic data highlights will include:
EU Council Meeting, German IFO, US Durable Goods, Rts/Michigan Consumer Sentiment Index.
