AUD/USD: 0.8915EUR/USD: 1.3600The Euro has come under pressure today after solid US data helped the dollar build some positive momentum. Both the Empire State manufacturing index, which jumped sharply to 12.5 in January (exp 4.5) and the headline PPI, which accelerated to 1.2% yy in December (exp 0.8%) were a fair bit stronger than expected and both did their bit to reinforce the view that last week’s very soft NFP reading was an anomaly and that the US growth story is still on-track, albeit very slowly.
Earlier, final 2013 German GDP growth numbers were released, showing that the economy expanded by just 0.4%, against expectations of 0.5%. The weak number did little to help the Euro, and the export component, which rose just 0.6%, - following a 3.6% increase in the previous year - suggests that much of the growth was internal and that the rest of Europe is still struggling badly to gain any positive momentum.
Elsewhere today, the Euro came under some pressure after the Deputy Governor of Banque de France said that he thought the Euro was surprisingly high. Later in the day the Fed beige book was mildly bullish...economy expended moderately etc etc... but had little market effect. The Fed's Evans was also somewhat hawkish, but again had little effect on the market.
Today’s interest will come from inflation data, both from the EU and US, and the ECB monthly report. Later, the Philly Manufacturing index will come under scrutiny, which if it follows up today’s strong manufacturing release, could again propel the dollar higher.
Technically, the Euro has currently managed to hold on above the cluster of support that lines up below 1.3575, although the medium term rising trend line is once again under some pressure. The 4 hour charts do suggest that there is more room to the downside though, and under the session low of 1.3580 would head back towards further decent support at 1.3560/55 (daily cloud base/100 DMA), 1.3525 (61.8% of 1.3294/1.3892,) and then to 1.3500. Further out, 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) will attract.
On the topside, 1.3600 will now prove sticky (50% pivot of 1.3294/1.3892) and may be a bit of a magnate in the short term. While the indicators point lower though the upside looks a bit limited and 1.3625 (200 HMA) and 1.3642 (100HMA) should provide the resistance today. Beyond there 1.3680, 1.3700 and then 1.3720 (50% pivot of 1.3892/1.3548) will also see sellers but I don’t think they will be bothered for a while.
Use 1.3630/1.3550 as a guide
Economic data highlights will include:
EU/German CPI, ECB Monthly Report, US CPI, Jobless Claims, Philly Fed Mfg Index
