AUD/USD: 0.9085EUR/USD: 1.3920Risk associated currencies are slightly better bid in the absence of any escalation of affairs in Crimea. Safe haven currencies - Yen, Chf - are a bit easier, leaving the US$ rather mixed. Equities liked it and Gold has seen what seems to be quite an important reversal. While the status quo holds, the markets will begin to focus on Wednesday's FOMC decision and Janet Yellen's outlook on the US economy.
A slightly more positive view towards the situation in the Crimea has seen most risk assets regain some of their recent losses as the markets await Russia’s next move and the consequent response from EU and US.
The Euro is slightly higher after a generally choppy session but remains below 1.3950, with the market beginning to focus on the upcoming FOMC meeting (Wednesday) and subsequent press conference from Janet Yellen.
On the data front, the EU CPI was revised lower to 0.7% yy (Feb) while core CPI was unchanged at 1.0% yy, - while in the US, - the NY Empire State manufacturing index rose less than expected to 5.6 (Mar) but the Industrial production rose 0.6% , better than the expected 0.1%.
Today’s economic focus will be on the German ZEW Index and then later on the US CPI (exp 1.2% yy).
Technically there is not a great deal of change and it is possible that we will have another similar day today, ahead of the FOMC, unless there is any dramatic change in Crimea.
The longer term indicators are positive, although the dailies are in danger of becoming overbought, while the 4 hourlies are showing some bearish divergence, making for a rather confused picture, but if 1.3950, and last week’s high of 1.3966 can be overcome, then we can expect a more severe test of 1.4000 where barrier related selling can be expected to protect it. Good size stops are reported at 1.3970.
If/when the Euro finds the legs to head above 1.4000, there is not a lot 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, although I don’t really see what is likely to make this happen ahead of Wednesday, and suspect that instead, we could be in for another day of consolidating below 1.4000. If the Euro does continue to climb, expect increased rhetoric from the ECB to talk it lower once again. They will be getting increasingly unhappy if the Euro continues to climb against the other majors.
If the Dollar can find some legs of its own, then we could see a turn back to the session lows at around 1.3880, where the 100 HMA held it up today, and which now lies at 1.3890. Below there Friday’s low at 1.3847 (1.3850: 23.6% of 1.3475/1.3966, 200 HMA) and 1.3830 will see bids (daily tankan; 1.3835). Back under 1.3800, 1.3780 (38.2% of 1.3475/1.3966), 1.3760 (daily kijun) and then 1.3720 (50% pivot of 1.3475/1.3966) will see buyers ahead of 1.3700, which currently looks out of reach.
Look for another day of the same sort of price action, today using 1.3875/1.3975 as a guide.
Economic data highlights will include:
Trade Balance, ZEW Survey Economic Sentiment, Current Situation (Mar), US CPI (YoY) (Feb), Building Permits (MoM) (Feb), Housing Starts (MoM) (Feb)
Jim LanglandsFX Charts www.fxcharts.com.au
