AUD/USD: 0.9585EUR/USD: 1.3800The Euro finished Friday's session pretty much unchanged, near 1.3800, capped from making further gains by the important technical resistance at 1.3830 and not helped by the soft German IFO business sentiment indicator, which fell unexpectedly for the first time in six months, sparking concern about the impact of a stronger euro on the region's exporters.
In the US, Durable Goods Orders were mixed and were largely shrugged off. The headline figure rose 3.7% in September versus expectation of 2.0%, while the ex-transport orders dropped -0.1% versus consensus of 0.5% rise.
The Reuters/Michigan consumer sentiment index was revised down to a 10-month low of 73.2 from 77.5 in September which, coming on top of the soft NFP last week, added to the expectations that the Fed will delay any thoughts of tapering until at least the beginning of next year.
The coming week will be a heavy data one, with the main focus coming up on Wednesday when the Fed will make their first interest rate decision since the government re-opened. The press conference will give us a bit more of a clue as to what their thinking with regards to tapering will be in the months to come, but don't expect it to be on the agenda any time soon. If the Fed hints otherwise, there will be a nasty mess on the downside for the Euro.
Technically, there is little change. Fridays high at 1.3833 (61.8% of 1.4939/1.2041) is going to be tough to break, but we are sitting close by and another attempt looks likely early in the coming week. 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 and then not too much until 1.4000. If it makes it to 1.4000, there is then not a lot until 1.4250.
In the longer term, the Euro is sitting in the middle of the monthly cloud although this is not broad and has a top at 1.3955 which would act as strong resistance, if we see it. It has not been above the cloud since Oct 2011, so if we do head above it – on a monthly close basis, this week– the way is potentially open to much stronger gains.
On the downside, there is now some minor support in the 1.3860/70 area which acted as session lows on Thursday/Friday. Below there, 1.3740 (minor) and then 1.3710 becomes the first obvious target and beneath that 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%).
The indicators are mixed and suggest that the early pressure in the week could be to the downside, but the Euro should meet good support in the low/mid 1.37 area - if we get there - and may provide a buying opportunity for the longer term uptrend which looks to have further to run according to the dailies. At some stage a sterner test of 1.3830 would not surprise.
Use 1.3750/1.3830 as a guide today.
Economic data highlights will include:
M: German Retail Sales, US Capacity Utilisation, Industrial Production, Pending Home Sales, Dallas Fed Mfg Index
T: German Gfk Consumer Confidence, US PPI, Retail Sales, Case Schiller House Price index, Business Inventories
W: German, CPI, Unemployment, EU Consumer/Industrial Confidence, Economic Sentiment Indicator, US CPI, ADP Employment data, Fed I/R Decision/ Press Conference.
T: EU CPI, Unemployment, US Jobless Claims Chicago Purchasing Managers Index
F: US ISM Mfg PMI, US Total Vehicle Sales
