AUD/USD: 0.8755EUR/USD: 1.3520The Dollar is generally weaker today after mixed EU manufacturing PMI’s halted the Euro’s slide, but with the overall EU number coming in slightly better than expected at 54.0 (53.9 expected), while the US ISM Mfg number came in far below expectations at 51.3 (56.4 expected, 57 in December), putting the dollar under pressure and ensuring that the Fed will need to continue its tapering programme at a very gradual pace.
We will get to see more of what the US has to offer later today, when the US factory orders are released in what is otherwise a fairly quiet session as far as data is concerned, with the market now beginning to look towards Thursday’s ECB meeting ahead of the USJobs/NFP data on Friday.
With this in mind, the dollar has actually held up reasonably well against the Euro , which has been unable to make any major gains, mostly because of the concerns that the ECB could once again cut rates following last week’s softer than expected inflation number. The general consensus seems to be that the ECB will not cut, despite the calls from Deutsche/RBS to do so. Having held Fridays lows the Euro has squeezed back above 1.3500 to as high as 1.3535 where it has so far faded.
The shorter term indicators remain positive though, and while our medium term outlook remains bearish, we need to allow for some further upside, and if we can take out the session high at 1.3535 then we could look towards a squeeze to the first minor Fibo resistance at 1.3573 (23.6% of 1.3892/1.3476), where minor downtrend resistance also lies and thus, should be reasonably strong. A break of this would head on towards 1.3600(100 DMA/Daily Cloud Base) and then possibly to 1.3635 (38.2%), but which is unlikely today given the lack of data from the EU/US. The upside will also be limited to an extent by the ongoing selling in Eur/Jpy.
On the downside, below today’s 1.3480 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 1.3485/1.3570 as a guide today, with the preference still being to sell rallies, looking for an eventual run lower towards the 200 DMA(1.3373), albeit that it won’t be today.
Economic data highlights will include:
EU PPI, US Factory Orders
