AUD/USD: 0.8875EUR/USD: 1.3550The dollar has broken back below 1.3600 against the Euro, and is firm all round, following the release of the Q4 US GDP data showing an annualized growth rate of 3.2%, matching expectations, but lower than the Q3 reading of 4.1%. The mixed outcome has done nothing though to change expectations that the Fed will continue its tapering programme in the months ahead.
Earlier in the day the EU data was mixed, with German unemployment dropping by more than expected by -28k in January (exp -5k) to 6.8% in January, while the CPI unexpectedly fell to 1.3% yy.
Today’s highlight will be the provisional EU CPI (exp 0.9% yy), Unemployment and then later the US Personal Spending numbers. The EU CPI will be the main focus, and a reading below expectations will have the market eyeing an ECB easing, placing heavy pressure on the Euro.
Technically, having broken back below the 100 DMA at 1.3600 the Euro is currently resting on the uptrend support, currently at 1.3550. A sustained break, which the shorter term charts are suggesting is very possible would lead the Euro back towards 1.3525 (61.8% of 1.3294/1.3892), and then below 1.3500 would head down towards 1.3455 (23.6% of 1.2042/1.3892 & 38.2% of 1.2755/1.3892) and eventually, 1.3435 (76.4% of 1.3294/1.3892). Below there would bring the 21 Nov low of 1.3398 into focus, ahead of the 200 DMA at 1.3373.
On the topside, there is now minor resistance at 1.3585 ahead of 1.3600 and it would need a break back above the 100DMA to provide some stability that would take us back towards 1.3615 (38.2% of 1.3739/1.3543) and possibly beyond there to 1.3540 (50%) and 1.3660 (61.8%).
Also of note, in Ichimoku terms, we have today made a close below the base of the daily cloud at 1.3562, which should act as a hinderence to any rally.
I don’t really see too much of a rally today, although we do need to allow room for a move back to 1.3600, but overall I think the Euro is going to ratchet slowly lower over the next few days as the dollar slowly picks up strength, with the caveat that a very weak CPI reading today would potentially mean a sharp sell-off. I would rather be short than long!
Economic data highlights will include:
German Retail Sales, EU CPI, Unemployment, US Personal Consumption, Personal Spending, Rts/Michigan Consumer Sentiment Index
