AUD/USD: 0.8960EUR/USD: 1.3710The issues in the Ukraine/Crimea put an early bid tone under the dollar but that seemed to calm down a little as the day wore on. Yellen's dovish tone in her testimony to the US Senate gave risk markets, - hoping for a postponement in further tapering of the stimulus programme, - a bid tone and at the same time put the US$ on the defensive and most pairs are back roughly where they started the session. EU CPI, US GDP, Personal Consumption will drive markets today. There is plenty of Japanese data, as well as bits and pieces from NZ and Australia, so hope for a busy session! Have a good w/e.
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Having initially headed lower to trade down, to 1.3643, on an apparent escalation of tension in the Ukraine, the Euro has regained its lost ground since Janet Yellen's testimony to the US Senate banking committee. She has said nothing revolutionary but has struck a very cautious tone, reiterating that recent U.S. economic indicators have looked weak, raising market hopes that further tapering may be postponed until the data improves. She added that it is difficult to say how much the latest soft data was due to rough winter weather and that the Fed will remain attentive to signals on whether the recovery is progressing in line with expectations. Nothing scintillating, but she had the effect of squeezing the shorts, as the Euro bounced and headed back above 1.3700, to 1.3727 (200/100 HMA) before drifting a bit lower late in the NY session after Mario Draghi said that the ECB will remain alert to further downside price risks.
Technically it all looks set to remain rather choppy, with the 4 hour chart indicators having turned higher once again, while at the same time, the dailies still appear to be rolling over to the downside. The hourlies are also pointing higher and I suspect that in the short term we are probably heading back to the session high of 1.3727, above which 1.3770 could once more come into view, but which, if we see it, will again be strong resistance. Beyond there, the points to watch remain unchanged although should not be seen today unless the provisional US GDP/Personal Consumption numbers are very weak (exp GDP 2.5%), which would send the dollar lower. Above 1.3770/75 resistance, we would head to 1.3800 and then to the important trend resistance at 1.3830 (and 61.8% of 1.4939/1.2042), albeit probably not today.
On the downside, 1.3685, 1.3660 and today’s low at 1.3643 become the initial supports. Stronger bids will be seen at the 100DMA/23.6% of 1.2753/1.3892 which both lie at 1.3630 and at 1.3625 (daily Kijun/50% of 1.3476/ 1.3773/base of the daily cloud). I would doubt that we go below there at the first attempt but if/when this area gives way, then a run back towards 1.3590 (61.8% of 1.3476/ 1.3773) and possibly to 1.3545 (76.4%) is on the cards.
Stay flexible, but for the time being use the 1.3640/1.3770 range as a guide and in the short term it looks more likely to be stuck within 1.3680/1.3740. Any deterioration on the situation in the Ukraine will see another flight to safety and increased demand for the dollar but in the meantime it is more likely to be the data and end-of-month flows that dominate trade.
Before the US numbers, the market will be closely watching the EU CPI figures.
Economic data highlights will include:
German Retail Sales, US GDP, Personal Consumption/Expenditure
Jim LanglandsFX Charts www.fxcharts.com.au
