AUD/USD: 0.9065EUR/USD: 1.3665The ECB left rates unchanged at 0.25% as widely expected today and lowered 2014 inflation projection to 1.1%, down from prior forecast of 1.3%, well below its own two year 2% target, while the economic growth projection for the EU was revised up to 1.1% in 2014 and to 1.5% in 2015. In his press conference, Mario Draghi said that "medium term underlying price pressure in the EU are expected to remain subdued and that monetary policy will remain accommodative for as long as necessary and that key interest rates are likely to remain at current or lower levels for an extended period of time".
Having added that the ECB is ready to act if necessary to lift the economy, Draghi did nothing today to suggest that any further easing is imminent and indicated that last month’s surprise cut needs to be given time to work its way through the system, so the Euro headed higher, breaking the 1.3630 resistance level and pretty much ignored the later release of the positive US GDP data which indicated that Q3 growth was revised up to 3.6% annualized, better than the expected 3.1% and up from initial estimate of 2.8% which is the strongest reading since Q1 2012. Elsewhere, the Initial jobless claims unexpectedly dropped to 298k and now we await the release of the US unemployment and NFP data later today – exp 7.2%/180K.
For its part, the Euro has maintained its positive tone in heading to 1.3675 at the NY close,- the daily cloud top -, which currently acts as resistance, but looks positive for potential gains towards 1.3700/10 (1.3702: 76.4% of 1.3831/1.3294), beyond which could head towards the congestion area starting at 1.3740. It would take a fairly dire NFP reading to do head beyond this, although the 4 hour momentum indicators do point higher and we could yet see a test of this area, beyond which would take us back towards 1.3800 and the October high of 1.3831 .
On the downside the 1.3630 area now becomes the first point of support ahead of 1.3600, below which we would revisit the congested area of the last few days with solid support to be seen at 1.3525.
Wait for the NFP for any real direction, it is all toss of the coin stuff, but the short term indicators do point higher, although as before, I still prefer to look for areas to buy dollars for a return to strength, although possibly not until early next year. The ECB will not want to see a higher Euro and if it does approach 1.3800, we can expect to see an increase in the rhetoric from the board members, attempting to talk it back down.
Be flexible today. Have a good weekend.
Economic data highlights will include: German Factory Orders, US Unemployment/NFP, Personal Income/Spending, Personal Consumption, Consumer Credit, Rts/Michigan Consumer Sentiment
