AUD/USD: 0.9135EUR/USD: 1.3588Despite the EU PPI dropping by -0.5% mm, -1.4% yy in October (exp -0.2% mm, -1.0% yy) the Euro is a bit higher today, helped out by an unexpected slight improvement in Spanish employment data. The dollar was generally a bit weaker all round, ignoring a turn lower in the equity markets on some anticipation that the Fed may soon begin tapering its stimulus program following the stronger than expected ISM manufacturing data on Monday. The focus will now turn to the US GDP tomorrow and then the Unemployment/NFP data on Friday, and these are going to provide the direction heading into next week. A strong reading in each of these would begin to convince the market that tapering is almost upon us and would most likely lead to a return to dollar strength.
In the meantime, the Euro is enjoying itself, back at 1.3600, having been up to a session high of 1.3613. The technical points to watch remain pretty much unchanged as the Euro has yet to take out the recent high of 1.3621, which comes ahead of 1.3627 (61.8% of 1.3832/1.3294), which is also now where the descending trend resistance lies. There is then some minor resistance at around 1.3650 and above that could see acceleration towards 1.3710 (76.4%). I am not sure that we are ready for this yet.
On the downside, the near term support levels are at 1.3580 and then 1.3550, both minor, ahead of the 1.3524 session low. Below 1.3510 (daily Tenkan) would see a run towards 1.3485 (61.8% of 1.3398/1.3621/rising trend support) and 1.3475 (daily cloud base), which should be very strong.
There will be a fair bit of data out today and it could jump about a bit, but with the 4 hour and daily momentum indicators both currently being pretty flat the direction is a bit tricky to pick. I still prefer to look for levels to buy dollars but it may be a bit early at this stage. The EU GDP and Retail Sales will provide some interest ahead of the US Trade Balance, Home Sales, ISM Non – Mfg PMI and the ADP Jobs data (exp 170K), which may give us a clue of what to expect from the NFP on Friday.
Use 1.3550/1.3650 as a guide but I am fairly neutral in view for the next 24 hours and suspect that we chop about, at least until the US data, and probably until the ECB on Thursday, unless the EU services PMI's are way out of kilter later today.
Economic data highlights will include:
German Services PMI, EU Composite/Services PMI, GDP, Retail Sales, US ADP Unemployment, New Home sales, Trade Balance, ISM Non – Mfg PMI, Beige Book
