AUD/USD: 0.8968EUR/USD: 1.3630The Euro was assisted today by slightly improved services data from the EU, where both Spain and Italy continue to show some signs of recovery, while the US$ was a bit weaker following the release of the China services data, which came in a fair bit weaker than expected at its lowest since August 2011, and followed on from the soft manufacturing PMI, released last week. Later in the session, the weaker US ISM non-manufacturing PMI fell to 53.0 (Dec) against expectation of a rise from 53.9 to 54.5 and saw further pressure put on the dollar, which took the Euro back above 1.3600 and on towards the session high at 1.3652.
Today’s data highlights will include the German Unemployment, (exp 6.9% - Unch), EU CPI (0.9%YOY-Dec) and then later on the US monthly trade balance.
Technically the short term charts continue to unwind their oversold condition and we are approaching the area, where yesterday we suggested that we would prefer to be a medium term seller in the 1.3650/70 range.
The 4 hour charts actually have reasonable positive momentum and so while the 1.3650/70 sell area remains valid, we could yet carry on to slightly higher levels, so I would leave room to sell into further strength towards 1.3700 (1.3692: 38.2% of 1.3892/1.3570, 200 HMA: 1.3702). If/when short, as with yesterday, I would be leaving stops above 1.3775.
Although the short term charts remain positive, the dailies are still pointing lower, and the downside will now find initial support at 1.3600 and then at the session low at 1.3570. Below this, strong support will be found at 1.3560 (daily cloud top) and again at 1.3545/35/25 (Rising trend support, 100 DMA, 61.8% of 1.3294/1.3892,) ahead of 1.3500 and then 1.3455 (23.6% of 1.2042/1.3892 & 38.2% of 1.2755/1.3892) and 1.3435 (76.4% of 1.3294/1.3892). If /when this area is seen it should also prove very strong support and where any profits on shorts should be taken.
Given the relative lack of data ahead of the FOMC minutes, tomorrow, we could have a choppy session ahead of us, and following the improved EU data, it appears likely that the ECB are unlikely to make any changes to policy on Thursday, so we could see the Euro grind a little higher. For today then, use 1.36/1.3700 as a guide.
Ultimately, ahead of Friday's NFP, a 1.3550/1.3700 range would not surprise.
Economic data highlights will include:
German Unemployment, Retail Sales, EU CPI, PPI, US Trade Balance
