AUD/USD: 0.8900EUR/USD: 1.3775A pretty hectic session on Friday saw a dash for the exit by US$ bulls, with further pressure looking likely in the days to come. The stronger EU CPI data came ahead of Mario Draghi speaking to the EU Parliament today and the ECB Meeting on Thursday - leaving the market wondering whether the ECB has room to ease rates. Key focus elsewhere this week will be on the RBA, BOE meetings and on Friday's US Jobs/NFP data. We also get the monthly PMI releases, starting today. The Aud sees plenty of action, starting today with the TD Inflation, Mfg PMI, Home Sales, ANZ Job Ads, HSBC China Mfg PMI and China Non–Mfg PMI. Throw in the Ukraine debacle and the weakening Yuan concerns and it looks like a busy week all round!
The Euro headed sharply higher against the dollar on Friday after the EU CPI data release eased the pressure for ECB to take action to ease rates at the upcoming meeting this Thursday. The inflation reading came in at 0.8% yy for Feb, better than the expected 0.7% and unchanged from January. The unemployment rate was also unchanged at 12.00%.
Elsewhere on Friday, the US GD, grew an underwhelming 2.4%, and the Chicago PMI was better than expected, although the dollar took little notice.
A big week lies ahead for economic data, and aside from the ECB (& BOE) meetings, amongst a host of other numbers, we have the PMI’s, all due early in the week and then the US Jobs numbers & NFP on Friday. No lack of opportunity!
Technically the Euro made some important technical gains late in the week, and it is beginning to look as though it could build some strong momentum to head higher as the US$ comes under increasing pressure. The DXY (see report) has finished the week/month below important rising trend support (& 200 WMA) that we have mentioned previously and it looks as though the dollar could be in some trouble in the weeks ahead
Having spiked up to take out the resistance/stops at 1.3770, the Euro headed straight to the next resistance at 1.3825/30 where the important Fibo (61.8% of 61.8% of 1.4939/1.2042) and descending trend resistance, going back to 2008, lie. This has so far capped the Euro's rally and will not be easily overcome, but if the ECB refrain from adding any economic stimulus and then we get another soft reading from the NFP on Friday, the Euro could be headed a fair bit higher. Above 1.3830, the next target would be 1.3892 (27 Dec high) and then 1.3950 (50% of 1.6037/1.1876/ Monthly cloud top). If we get above 1.4000, then don’t sand in the way, as I do not see a lot to stop it heading to the Oct 2011 high of 1.4246, which is also 76.4% of 61.8% of 1.4939/1.2042.
The near term resistance of course has yet to crack, and if the ECB does ease, which Mario Draghi may have been hinting at on Friday when he said that the ECB “remains alert as to any indication of further downside risks to price stability " and that the Bank are "ready to act", then the Euro is going to head lower again. He will testify to the EU Parliament later in the coming session which may provide further clues/volatility.
The Euro will not be helped either if Putin keeps ramping up the pressure on the Ukraine which seems to be the case judging by the latest press stories. 20 Years ago, US$/Dem would have jumped about 10 big figures on that sort of story! We have so far managed 100 points in the other direction!
Support is now found at 1.3770 and below there at 1.3700, with a couple of minor levels in between. Below 1.3700 would potentially head back to last week’s 1.3643 base but currently looks rather unlikely.
In the meantime buying dips towards 1.3770, possibly 1.3740 looks to be the plan for an eventual break to the topside.
Economic data highlights will include:
M: Draghi testifies to EU Parliament, EU Mfg PMI’s, US Core Personal Consumption Expenditure, Personal Spending, Construction Spending, Markit Mfg PMI, ISM Mfg PMI, Vehicle Sales
T: EU PPI
W: EU Services PMI’s, GDP, US ADP Jobs Data, Markit Services PMI, ISM Non-Mfg PMI, Beige Book
T: German Factory orders, ECB I/R Decision, US Jobless Claims, US Factory orders
F: German Industrial Production, US Unemployment/NFP.
Jim LanglandsFX Charts www.fxcharts.com.au
