AUD/USD: 0.8815EUR/USD: 1.3615The dollar was reasonably steady against the Euro on Thursday, recovering earlier losses after the Euro headed up to a high of 1.3650 after the release of the US data, in which both the initial jobless claims (-2K) and the CPI (+0.3% Dec, +1.5% yy) pretty much met market expectations. The Philly Fed Manufacturing Survey came out a fair bit stronger than expected at 9.4 (exp 8.6) and did the dollar no harm, although the reaction was relatively muted. At around the same time buyers lost any enthusiasm for the Euro after the ECB's Coeure stated in an interview that downside risks to inflation need to be watched, that there is room to cut the refinance rate, and that the deposit rate could head towards negative territory, if necessary.
Earlier in the day, EU headline CPI was unchanged at 0.8% yy in December, in line with expectations, while the core reading was revised down by 0.2% to 0.7%. In Germany, both the headline and core CPI were unchanged, at 0.4% and 1.4% respectively. The ECB governing council at its monthly meeting strongly emphasized that it will maintain an accommodative stance of monetary policy for as long as necessary.
Looking ahead, today will see little from Europe, although there is some housing data from the US, as well as the Michigan Uni Consumer Sentiment Survey, which might provide some volatility late in the session.
Technically little has changed and for the time being, as we said yesterday, 1.3600 is acting as a bit of a magnate and this looks likely to continue for the coming session.
We are still sitting on the rising trend line, and although we have again tried to break below it today the Euro has, so far, held on above 1.3580. As previously stated, we really need a sustained move below here in order break away from the trend support, at which point we would head down towards further decent bids at 1.3560/55 (daily cloud base/100 DMA) and 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.
A return to the topside will find minor sellers at 1.3630 (200 HMA) and then at the 1.3649 (100 HMA) session high. Above here 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.
The shorter term indicators are inconclusive and I suspect we may continue to use 1.3600 as a pivot. I don’t see a great deal of action, but it is a Friday and so will get thin later on, so keep stops in place.
Use 1.3570/1.3650 as a guide.
Economic data highlights will include:
US Building Permits, Housing Starts, Industrial Production, Rts Michigan Consumer Sentiment Index.
