AUD/USD: 0.8770EUR/USD: 1.3690It was a big day for the EU bloc and the Euro. The better than expected French manufacturing PMI (48.8 vs 47.5 exp) got the ball rolling in early Europe, with the strong German number (56.3 vs 54.6 exp) backing it up, squeezing the shorts badly as the Euro headed strongly higher, putting the US$ under pressure on all fronts against the EU bloc and the charts suggest that there could be more to come.
The market was obviously caught very short of Euro’s, which has pushed to a high of 1.3697 and looks from the 4 hour charts as though it has the momentum to carry on beyond 1.3700, although there is very little data out from anywhere today and the market may pause to catch its breath ahead of next week’s important Fed meeting and the chance of further tapering of its current stimulus programme.
Elsewhere today, the Spanish unemployment rate for Q4 was 26.03% - as expected, while the dollar was not helped by the weaker than expected US Mfg PMI (53.7 v exp 55.0). Initial jobless claims rose slightly to 326k, beating expectation of 331k.
Technically, most of the near term resistance levels have been wiped out and the 4 hour charts remain positive for further gains. The first port of call, will be 1.3700 (50% pivot of 1.3892/1.3507, weekly Tenkan resistance) which should be strong, and then 1.3743(61.8%) and 1.3800 (76.4%). Above that takes us back to the 1.3892 (27 Dec) high although I don’t see that happening yet.
The downside will now find bids at 1.3645 (23.6% of 1.3507/1.3687) and then 1.3618 (38.2%). It does not appear that we are heading back to 1.3600 in the near term, but if wrong, look for a run towards 1.3575 (61.8%).
The hourly charts are now overbought and I suspect that today we may want to chop around at current levels in the absence of any news coming to the market. But I suspect the market is still caught short and that we are unlikely to see the Euro trade much below 1.3650 today, with a good chance that we could head above 1.3700.
If the speculation that the Fed are going to increase the levels of tapering next week, we could see the dollar regain some of today’s lost ground, but I would expect a rather directionless session. It will be a bit nervous though I suspect, so keep stops in place.
Use 1.3670/1.3730 as a guide
Economic data highlights will include:
World Economic Forum – Davos
