AUD/USD: 0.9055EUR/USD: 1.3785The dollar remains under pressure, allowing the euro to make further gains today, amidst the uncertainty over whether or not the Fed will announce plans to taper its USD85 billion in monthly bond purchases at next week’s meeting. Equity markets certainly seem to think that tapering is imminent after today's session, which saw the S+P fall from 1808 to 1779 while the Dow fell by 180 points.
The dollar had earlier looked a bit firmer after the news of the US budget deal to avoid another government shutdown, but it failed to extend its gains and currently sits at 1.3785 against the Euro, unchanged from yesterday, having been up to 1.3810, but yet to test the 25 Oct high at 1.3831.
More of the same looks likely today and the slow grind higher could yet continue, although I remain dubious as to whether we are yet ready to take out 1.3830 and it may be that the top of the channel continues to restrain the topside for the Euro. If/when 1.3830 is taken out, which will not be easy given that this is also a major Fibo level (61.8% of 1.4940/1.2042), then look for advances on towards 1.3858 (Nov 2011 high), beyond which, the way appears open towards 1.4000, with not too much standing in between although I don’t yet think we are ready for that.
On the downside, there is minor support at 1.3775 and then again at 1.3740, and I am doubtful at present of heading much below 1.3700. The first Fibo support arrives at 1.3690(23.6% of 1.3294/1.3810). Should this fail to hold its ground, then 1.3675 will provide the initial minor support, below which we would head back towards 1.3650 and potentially to Fridays spike low at 1.3617.
There is not too much data out of Europe today and the US retail sales are likely to be the main driver. I would imagine that 1.3750/1.3830 could well cover it, with the pressure remaining on the downside for the dollar ahead of nest weeks FOMC meeting.
Economic data highlights will include:
EU Industrial Production, US Jobless Claims, Retail sales, Business Inventories
