AUD/USD: 0.9100EUR/USD: 1.3540The EU Mfg PMIs were generally moderately better than expected with Germany (52.7 v exp 52.5) and the overall EU figure (51.6 v exp 51.5) holding things up above 50, with Italy also contributing (51.5 v exp 50.9). Elsewhere though, things were not so rosy with France (48.4) and Spain (48.6), both below the 50 barrier. Having been up to 1.3615 in Asia, the Euro headed quite sharply lower as the markets grow concerned about a possible growing divergence within the individual components of the EU, with Spain being of particular concern and France not being much better off in falling to a 5 month low, while at the same time, the overall EU figure was the highest reading in two years.
Later in the session, the ISM manufacturing and construction data indicated that the U.S. had expanded at its fastest pace since April 2011, beating forecasts and doing nothing to hurt today's interested to buy dollars as US yields headed higher.
Looking ahead, the market will now have Thursday's ECB meeting and then Fridays NFP/US Jobs data in focus. Today is fairly light on data, with only the EU PPI to give us any real direction and I would imagine that we are on for another session largely governed by the 1.35/1.36 range.
The 4 hour momentum indicators are pointing to the possibility of further downside pressure for the Euro. The first support will be close by at 1.3535 (38% of 1.3398/1.3621), below which would retest the days 1.3525 low. Under that would see a run back to 1.3510 (minor), 1.3485 (61.8%) and 1.3475 (rising trend support/base of wedge and also daily cloud base), which should therefore be very strong. If we were to break the 1.3470 area, then the Euro would probably tend to accelerate to the downside towards 1.3400, but I do not see this happening yet.
A return to the topside would now find sellers at 1.3560 and 1.3580 ahead of 1.3600. I do not see it back at the session high of 1.3615, or indeed heading to the recent peak at 1.3621. If wrong, then we can expect a squeeze up towards 1.3627 (61.8% of 1.3832/1.3294) and then the descending trend resistance at around 1.3640. Above that could see acceleration towards 1.3710 (76.4%), but again, I cannot see that happening for the time being.
Today look for a 1.3500/1.3585 range with an unchanged view of selling into strength for an eventual run towards 1.3470, and with stops placed above 1.3600, or preferably 1.3630.
Economic data highlights will include:
EU PPI
