AUD/USD: 0.9025EUR/USD: 1.3860A hectic day, dominated by the Ukraine military/China economic concerns, with Mario Draghi also making comments that caused a sharp Euro reversal from a 2 year high. The Yen remains in demand as a safe haven, while both the Kiwi and the Aud have been busy. Equities are sharply lower as well, so we could be in for a busy end to the week, with traders concerned about holding risk positions over the weekend in case the Crimea problem escalates once more. Good luck. have a good w/e.! Be square!
The Euro climbed to a 2 year high of 1.3966 with market perceptions apparently being that the worst of the economic crisis may be over in the EU, although its gains were limited ahead of 1.4000 because of the increasing threat of an escalation of the tensions in the Ukraine, after the German foreign minister reported that attempts to de-escalate the situation in Crimea had been rejected by Russia. The dollar received some support of its own after the better than expected retail sales, which rose by 0.3% in February, and from the Initial jobless claims, which dropped to 315K (exp 334K).
As I write, Mario Draghi has commented that the ECB is ready to act if necessary to guard against inflation and that the exchange rate is of increasing relevance in the assessment of price stability. The Euro has given up a very quick 70 points on the back of this and currently sits on its lows at 1.3852.
Technically, it looks as though we have a failure – at least in the short term – ahead of 1.4000, and the 50% Fibo pivot of the long term decline from 1.6037/1.1876 at 1.3950 will continue to act as a hurdle. If/when that (and the session 1.3966 high) can be overcome on a sustained basis, then 1.4000 will be under attack, but no doubt protected by option selling interests. As I said before though, once above there, we could be in for quite an acceleration and there is not too much resistance that I can see 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.
In the meantime, it looks as though we have seen a bit of a top, and the combination of the bearish divergence and the negative momentum on the 4 hour charts suggest that we may have a test of 1.3800 ahead of us. Currently trying to break through support at 1.3850 (23.6% of 1.3475/1.3966), the next stop would be 1.3830 (200 HMA), which was the original break out level of the long term downtrend resistance (and is where the daily Tenkan currently lies), and then 1.3810, where that trendline now lies and will provide minor support. Below there, 1.3780 (38.2% of 1.3475/1.3966) and then 1.3720 (50% pivot of 1.3475/1.3966) will find bids. 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.
It could be an active day, but Draghi’s comments appear to have caught the market a bit long of Euro’s and thus I suspect the upside should be a bit limited today as they try and scramble out. Selling rallies towards 1.3880 would seem to be the plan, with a SL placed above 1.3915, for an eventual look at 1.3800 and possibly lower, with the Russian situation also looking likely to act as an impediment to the Euro today as we head into the weekend.
German CPI and the Rts Michigan Consumer Sentiment Index will be on the radar.
Economic data highlights will include:
German CPI, EU Employment Change, US PPI, Rts Michigan Consumer Sentiment Index:
Jim LanglandsFX Charts www.fxcharts.com.au
