AUD/USD: 0.8810EUR/USD: 1.3560It has been another rather uninspiring session, with the dollar having given up its earlier gains on the back of a WSJ article that suggested that the Fed will announce a further reduction in tapering, to $65 billion per month from the current $75 billion, at the Jan 28-29 policy meeting. Later on, the Euro came under further pressure following the weaker than expected German ZEW economic sentiment for January (61.7 v exp 64.0). However the strong support in the 1.3500/25 area has once again held and some short covering has seen the Euro rebound to sit pretty much unchanged. Unfortunately with very little data today out of either the EU or the US it may be another tight session, although the world economic forum will kick off in Davos, so we may get some left field statements to provide some volatility – doubtful.
Ahead of the Davos get ego-fest, the IMF has reported that it expects the global economy to grow by 3.7% in 2014, up from an October forecast of 3.6%. This has added to the view that the various central bank stimulus programs will be wound back, with focus on what the Fed might do after the outlook for 2014 predicted the U.S. economy to expand 2.8%, up from an October forecast of 2.6%.
Technically there is once again little change, although the 4 hour charts are now beginning to point a little higher and thus we could see a bit of a run to the topside.
That being the case, 1.3560 will again be the first hurdle (100 DMA/Daily Cloud Base), but if we can head above the session high of 1.3568 and continue to squeeze higher, further sellers will be evident at 1.3580 which provided a base for the last couple of day’s trade. Above 1.3600 (23.6% of 1.3892/1.3507/descending trend resistance) would then head towards 1.3615 (Daily Cloud Top), 1.3630 and 1.3650 (38.2% of 1.3892/1.3507).
On the downside, back below 1.3525 (61.8% of 1.3294/1.3892) would see another swing to the day’s low (1.3515), where good bids are lined up ahead of 1.3500. Beyond 1.3500 heads down towards 1.3485 (minor), 1.3455 (23.6% of 1.2042/1.3892 & 38.2% of 1.2755/1.3892) beyond which, 1.3435 (76.4% of 1.3294/1.3892) will attract.
I don’t see a great deal of activity today, but the upside does look mildly favoured and the focus today could be on Eur/Jpy following the release of the BOJ I/R decision. The dailies remain negative though and I still think that near term rallies are sell opportunities for an eventual break of 1.3500. In the mean time we may see a test of 1.3600/20. It should become a bit more lively tomorrow with the release of the global PMI’s.
Economic data highlights will include:
World Economic Forum – Davos
