AUD/USD: 0.9335EUR/USD: 1.3435It took a while for the market to catch on, but the Euro finally fell off its perch after a Bloomberg released a report that the ECB is considering negative deposit rates on bank deposits for overnight cash to boost inflation closer to its target. This was in fact signalled over the weekend by an ECB board member, but ignored at the time.
Having squeezed up to a high of 1.3578 in Asia yesterday, after Ben Bernanke's reiteration that low rates are on hold for the foreseeable future the Euro has since collapsed to as low as 1.3435 ahead of the FOMC minutes.
Earlier in the session the German PPI for Oct was released: -0.7%yoy v -0.6% exp.
With regards to the US data, headline CPI fell to 1.0% yoy in October, the lowest since October 2009 and well below Fed's 2% target. Retail sales rose more than expected by 0.4% in October while ex-auto sales rose 0.2%, also above expectation.
The FOMC minutes have just been released and confirmed a mildly upbeat view on the economy but they gave no further clue on when to expect tapering to commence. US 10-year yields are up 8 basis points from the lows of the day to 2.78% after the release of the minutes.
Technically the Euro is holding on above 1.3400, (61.8% of 1.3294/1.3578). Below that would head towards the 100 DMA 1.3375 and then to 1.3360 (76.4%). Below that would see an acceleration towards the previous low at 1.3294 and the Weekly Kijun at 1.3287, which should therefore be strong, ahead of 1.3274 (76.4% of 1.3105/1.3832).On the topside, sellers should now appear at 1.3450 (minor ) 1.3475 and 1.3500. I don't think we are going up there today and it now looks as though the pressure will be on the downside for the Euro, and if it can break below 1.3300 we would then have the possibility of eventually fully retracing the whole rally from 1.3105 although that is yet some way off.
Economic data highlights will include:
EU Flash Mfg/Services/Composite PMI’s, Consumer Confidence, US PPI, Philly Fed Mfg Survey
