AUD/USD: 0.8855EUR/USD: 1.3485The soft German Retail Sales and the weak EU CPI reading on Friday (0.7% yy, - less than the expected 0.9% and far below the ECB annual target of 2%), ensured that the Euro remained under pressure, and it looks as though it could have further downside ahead in the days to come. The data, which raises concerns that the EU could be heading towards deflation and economic contraction, increases the possibility that the ECB will cut rates again on Thursday, with Mario Draghi having previously stated that the Bank stands ready to act if the medium term inflation outlook remains below target. A couple of major banks did their bit on Friday by calling for the ECB to cut rates this week, and the ECB’s Coeure suggested that the Bank has the tools to lift inflation despite the low rate environment. Perhaps that was a hint…we shall see on Thursday.
Elsewhere in the coming week, we start off today with the manufacturing PMI’s, but the main focus of the market will be on Friday’s US Jobs numbers and NFP reading, (exp 6.7%, +185K)
Technically the Euro has taken out some decent support in the 1.3500/25 area in falling to a low of 1.3478 and the dailies are beginning to point lower once again.
While the short term charts show some minor bullish divergence we should allow for a bit of a squeeze to the topside, where, above 1.3510 would head back to 1.3525 and then towards 1.3538 (23.6% of 1.3739/1.3478) and possibly to 1.3577 (38.2%).I doubt that we are heading back towards 1.3600(100 DMA/Daily Cloud Base) in the short term, and right now anything above 1.3550 looks a reasonable sell opportunity (SL above 1.3600).
On the downside, below Fridays 1.3478 low would see a run 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.
Use 1.3450/1.3530 as a guide today, but the preference remains to sell rallies looking for an eventual run towards the 200 DMA(1.3373), albeit that it could be a choppy ride in getting there. Keep an eye on the PMI’s today.
Economic data highlights will include:
M: EU Mfg PMI’s, US Mfg PMI, ISM Mfg PMI, Construction Spending
T: EU PPI, US Factory Orders
W: EU Services/Composite PMI’s, EU Retail Sales, ADP Unemployment, US Non-Mfg/Services PMI
T: German Factory Orders, ECB I/R Decision/Press Conference, US Jobless Claims, Trade Balance
F: German Trade Balance, Industrial production, US Unemployment/NFP
