AUD/USD: 0.9370EUR/USD: 1.3495The Euro finished the week in range trading mode, but slightly better bid as positive risk appetite returned to the market following Janet Yellen's testimony to the US Senate, at which she indicated that a Fed led by her would not be reducing its current economic stimulus anytime soon.
The dollar, for its part has generally been under a bit of pressure, given that the Fed will continue to keep the printing press rolling by pumping $85bio per month into the economy for the foreseeable future. It was not helped today by the release of the October US industrial output which fell by -0.1% (vs expectation of a rise of+ 0.2% m/m) following on from a rise of 0.7% in September. The November Empire Mfg and Oct export/import prices were softer than forecast which added to the pressure on the dollar.
Technically then, little has changed, as the consolidation/recovery from the previous week's sharp fall continues.
Despite a quick move up to 1.3505, the Euro was unable to maintain its gains and it finished the week off its highs, but looking mildly positive for further gains early next week.
The shorter term indicators are looking as though they are building some positive momentum and we could be headed for a firmer test of 1.3500 in coming sessions. The dailies, which had been pointing lower, appear to be recovering but good resistance remains in place at 1.3500/05 (1.3497: 38.2% of 1.3832/1.3294) and above here the daily Tenkan/descending trendline resistance is at 1.3516, which lies ahead of the daily Kijun at 1.3565.
The dailies look as though they may try to turn a bit higher still, and thus, if we do push through the near term resistance, look for a run up towards 1.3624 (61.8% of 1.3832/1.3294) and possibly to 1.3700.
On the downside, bids will arrive at last week's rising trend line, now at 1.3440 and then at the rising lows at 1.3432, 1.3418 and then at 13390. If we go under there we are likely to find bids at 1.3360 and below that at the 100 DMA at 1.3342, a break of which would see an acceleration towards the Weekly Kijun at 1.3287.and then 1.3274 ( 76.4% of 1.3105/1.3832). Beneath there would see a fall back towards the 200 DMA at 1.3216 beneath which, it would begin to look as though are going to retrace the whole of the move higher that began at 1.3105. This could be the eventual outcome, but not today.
I suspect that as risk appetite grows, the Euro will grind slowly higher in the short term but it has plenty of problems of its own and it is not going to race away to the topside, particularly if the ECB look like taking action to add further liquidity to the EU economy, which seems highly possible after weekend hints towards that outcome from an ECB board member.
For Monday, use 1.3470/1.3570 as a guide. There is plenty to data out this week to bounce it around, but I think that overall, while a reasonably neutral stance is again required, we might see the Euro squeeze slightly higher - at least early in the week.
Economic data highlights will include:
M: EU Current Account, Trade Balance
T: EU Construction Output, EU/German ZEW Economic Sentiment Survey
W: Bernanke Speech, German PPI, US CPI, Retail Sales, Business Inventories, Existing Home Sales, FOMC Minutes
T: EU Flash Mfg/Services/Composite PMI's, Consumer Confidence, US PPI, Philly Fed Mfg Survey
F: German GDP, IFO, US Flash Mfg PMI.
