AUD/USD: 0.9035EUR/USD: 1.3640In what was meant to be a quiet session, Asia decided to take out the stops in the Euro, pushing it on to a high of 1.3682 ahead of Janet Yellen’s testimony to congress. That was about as hectic as it got though, and since her comments, which contained few surprises, with her affirmation of a prolonged continuity of the current policy, the dollar has bounced mildly off its lows to sit unchanged against the Euro from this time yesterday, having briefly spiked to 1.3628.
She stated that she expects the Fed to continue winding back its bond purchases but reiterated that the US economy still has a long way to go before the recovery is complete and that low rates are here to stay until well beyond when the 6.5% unemployment and inflation thresholds are reached.
Having traded in a 50 point range today, there is really no change to the technical outlook, although the 4 hour charts, which had been pointing higher, now appear to be on the verge of turning lower again, and it could be that the dollar begins to pick up a little steam now that we know where Yellen stands on the policy front.
If that is to be the case, the first minor support will be at around today’s lows (1.3628) with 1.3634, the current level, being the first minor Fibo support (23.6% of 1.3476/1.3682), a break of which would take us back to the 100 DMA at 1.3602, which should be strong, also being the 100 Hour MA and 38.2% of 3476/1.3682.
If we do see a break lower, which I rather doubt today, although Mario Draghi will be speaking at a minor function and could say something to cause a few waves, then the next support comes in at further minor Fibo levels at 1.3580 and 1.3560.
As we said yesterday, 1.3685 is good resistance, this being the 50% pivot (red line-chart) of the move from 1.3892/1.3476 and is also where the weekly Kijun/Monthly cloud base both sit, and therefore should be very strong. I don’t see it above here today but if wrong it would see the bears scrambling as we head back to 1.3700 and above, initially to 1.3720 (daily cloud top) and possibly to the 24 Jan high at 1.3738. Above that, – which I don’t expect to see yet, if at all -, the way would once again be open to 1.3800 and above towards the recent 1.3892 high.
Another fairly quiet session looks in store in the absence of any major data, and once again I would use 1.3600/80 as a guide, with a mild preference to selling rallies near the resistance with a tight SL at around 1.3740. A break of 1.3600 would have the recent bulls a bit worried and could see some acceleration lower.
Economic data highlights will include:
EU Industrial Production, Draghi speech
