AUD/USD: 0.9090EUR/USD: 1.3860Mario Draghi's rather more upbeat outlook on the EU economy today took the market by surprise and lit a fuse under the Euro which dragged the other risk related currencies along for the ride. The US$ was generally on the defensive ahead of today's US Jobs/NFP reading, as was the Yen, which suffered from the broader risk-on flows that persisted, despite little progress on the Ukraine front. All the focus is now on the Jobs numbers, but Asia gets the BOJ monthly economic outlook and the Australian Construction PMI, while the UK has the Inflation Report, and from Germany, the Industrial Production data.
The Euro soared today after the ECB left rates unchanged as expected, but reacted to Mario Draghi’s press conference at which he indicated that any easing was not supported by the inflation outlook.. Rather than being somewhat dovish on the inflationary expectations, as the market had expected, he actually suggested the opposite in expecting the CPI to climb from February's 0.8% to 1.0% by the end of the year and then to 1.3% in 2015. On economic growth, he revised the outlook up to 1.2% in 2014, 1.5% for 2015 and then 1.8% for 2016.
After some choppy trade, the Euro jumped sharply higher and has taken out the important long term descending trend resistance at 1.3830 in doing so, reaching 1.3873 so far, ahead of today’s US jobs and NFP data (exp 6.6%/150K) which should help confirm if the US dollar is going to remain under pressure.
We could be in for a big move if the NFP once again misses expectations. Above the session high, the next important point is at 1.3892, the 27 Dec high. Above there, as can be seen on the weekly chart below, there is not a whole lot of resistance to be seen until the next major Fibo resistance at 1.4240 (76.4% of 1.4940/1.2041). Minor levels will involve sellers at 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 1.4240 objective.
A good NFP reading would see the dollar recover and signal that this is a false break. 1.3830 now becomes the immediate support, ahead of 1.3800. Back below here would see 1.3770 once more, below which 1.3700 has been a good base this week. It looks doubtful that we see this level again for a while but if wrong then the recent low at 1.3643 should provide ample support.
Wait until the NFP but it is beginning to look as though the Euro has some decent upside potential and the dailies look as though they are winding up for further gains.
The DXY is back below the important 79.95/80.00 support and is currently at 79.65 (December low). A break of this could be very important as technically there is not too much to hold it up ahead of the rising trend support at around 79.00, and then the 50% pivot of the move from 72.67/84.75 at 78.71, which would mean a much higher Euro.
. Economic data highlights will include:
German Industrial Production, US Unemployment/NFP
Jim LanglandsFX Charts www.fxcharts.com.au
