AUD/USD: 0.9010EUR/USD: 1.3870Risk aversion kept the market on its toes today after the soft weekend Chinese trade data, although most currencies were confined to a relatively narrow range. Cable was the exception and fell sharply but may have limited downside potential ahead of today's BOE Inflation report, which could be an early signal of an impending rate hike. Equity markets will watch the Shanghai Index after yesterday’s sharp falls. Data today will include the BOJ meeting -no change expected - and from Australia, NAB Business Confidence/Conditions. Later from Europe/NY we get the German Current Account and US Wholesale Inventories.
The soft weekend Chinese data ensured that markets were slightly more risk averse today although the Euro has more or less held its ground in very quiet trade, managing just a 35 point range through the entire session. Given the comparative lack of data coming up today we could be in for another session of much the same, with only the German Current Account and US Wholesale Inventories to provide direction. It could be a session of watching the equity markets after the steep falls in China yesterday, which coupled with the ongoing situation in Crimea, would seem to limit much of a turnaround in risk sentiment in the near term.
From a technical point of view there is little change, and for the time being 1.3900 continues to provide a cap. I suspect this will largely remain the case today given the elevated levels of the indicators on the 4 hour charts and if anything, we could see the Euro pull back to slightly lower levels as they unwind.
The first minor support would be at around 1.3850, ahead of the previous resistance, now support at 1.3830. Back below 1.3800 would hint at a false topside break and would suggest a run back down towards 1.3770, below which 1.3745 is 38.2% of 1.3475/1.3915. Beyond that, 1.3700 provided a solid base last week and 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.
On the topside, if we can take out 1.3900 and then Friday's high at 1.3915, which I am doubtful of doing today, then we should head on towards 1.3950 (50% of 1.6037/1.1876 & Monthly cloud top). If/when we get above 1.4000, we could be in for quite an acceleration as there is not too much on the charts to stop it heading on to the next major Fibo resistance at 1.4240 (76.4% of 1.4940/1.2041) which was also the Oct 2011 high.
Further out, the dailies still point higher and thus I suspect that a dip to day towards 1.3775/1.3800, should we see one, may be a buying opportunity for an eventual return to the topside and an eventual retest of 1.3915, although as I said, I don’t see it above here today.
Economic data highlights will include:
German Current Account, US Wholesale Inventories
Jim LanglandsFX Charts www.fxcharts.com.au
