AUD/USD: 0.9570EUR/USD: 1.3785The dollar is slightly firmer against the Euro in what has generally been an uneventful session, with the market seemingly content to wait for Wednesdays FOMC Interest Rate decision, that seems likely to be the catalyst for the next bout of dollar selling and which would take the Euro beyond the 1.3830 technical level that has so far capped it.
Although pending home sales fell, the dollar received some minor support after the release of the U.S. industrial production data, which rose by a 0.6% last month, above expectations for a 0.4% rise and the fastest increase in seven months. The Euro only fell to a low of 1.3775, and until the Feds decision on Wednesday it seems that we are likely to be contained within a relatively narrow range, although there will be a fair bit of data out today, highlighted by the US Retail Sales, which could cause some volatility.
Technically, little has changed. On the downside, the 1.3760/70 support has so far held firm and it will need a break of this to head towards 1.3740 (minor) and then 1.3710, the previous two year high and the first obvious support, beneath which we will move back into the recent consolidation between 1.3500/1.3680 and the first Fibo levels are now to be found at 1.3660 (23.6% of 1.3104/1.3830) and then at 1.3552 (38.2%).
On the topside, Fridays high at 1.3833 (61.8% of 1.4939/1.2041) is going to be tough to break ahead of the FOMC, but if we get a dovish outcome from the Fed 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.
I would not be looking for too much again today, but as we said last week, the Euro is sitting in the middle of the monthly cloud, which 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 close above it – on a monthly close basis, Thursday – the way is potentially open to much stronger gains.
With a dovish outcome from the Fed pretty much priced in for a weaker dollar and higher equity markets, I suspect we will need to be pretty nimbly in the next few sessions, so keep stops tight.
Economic data highlights will include:
German Gfk Consumer Confidence, US PPI, Retail Sales, Case Schiller House Price index, Business Inventories
