AUD/USD: 0.9130EUR/USD: 1.3840It was a choppy session today, driven by conflicting manufacturing data from Europe, which saw the Euro head lower, before a weak US reading put the dollar under pressure of its own. The Aud has been a big winner, recovering well from weak China data, while, apart from the US$, the main loser has been Gold, down $25oz. Focus will now be on the German IFO Business Climate/Outlook, but we also get some mixed data from the US as well as the UK CPI. Mario Draghi will be speaking later on, as will both the RBA Assistant Governor and then the Governor, both of whom are likely to try and talk the Aud lower. Also watch the G7 meeting, discussing Russia.
For once, the main business took place late in the US session, with the Euro shooting up from below 1.3800 to 1.3875, reportedly driven by SL buying, before settling at 1.3840. Earlier, having squeezed up to 1.3825 on the release of the stronger than expected French Mfg PMI (March 51.9 vs. 49.80 exp) the Euro then returned to 1.3800 equally quickly when the German figure came in at 53.8 (vs. 54.6 exp). It then headed further south after Bloomberg quoted an ECB board member as saying that the ECB “takes exchange rates into account with regards to policy”, diving quickly to rising trend support at 1.3770. Having hung around the lows, actually reaching down to 1.3760 at around the US open, the Euro has since recovered strongly as the US dollar has come under renewed pressure on all fronts, with the DXY back under 80.00, once again trading below the rising trend support/200 WMA, currently at 79.81.
Things are pretty mobile this morning, but the hourly charts are looking positive, as are the 4 hourlies so I don’t think I would want to be short, and for the coming session at least, it looks as though dips towards 1.3800 are probably a buying opportunity for a retest of the days high and then possibly the minor trend resistance at 1.3900, above which would suggest a retest of 1.3966 and eventually 1.4000. If we ever get there, this area won’t be easy to overcome as there well be plenty of option related sellers protecting it, but if/when the Euro finds the legs to head above it, 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.
Before any of that happens, the 200 HMA at 1.3867 needs to be overcome, while at the same time, on the downside, the 100 HMA is now providing the short term support at 1.3830. Back below there would probably mean another look at 1.3800, which if we see it would, I suspect, be a short term buy although if the Euro goes back under the session low at 1.3760 I would want to be out of any long positions. Last week’s low at 1.3747 would provide minor support ahead of 1.3720 (weekly tenkan /50% pivot of 1.3475/1.3966), ahead of 1.3700. Under there, lies the top of the daily cloud at 1.3680. The 61.8% Fibo support is at 1.3660, which in turn lies ahead of rising trend support at 1.3630.
We have the German IFO coming up today, and a decent reading could be the catalyst to push the Euro back above the session high and on towards 1.3900. Later, there will be a mix of US data, which in turn, could once again keep the dollar under pressure if we do not see any improvement in the general outlook.
Elsewhere, G7 leaders will hold talks on Ukraine and Crimea in a nuclear security summit in the Hague today and are expected to discuss how to place further pressure on Russia in order to avoid any any escalation of hostilities in the Ukraine. Mario Draghi will be talking in Paris.
Buying dips with a SL under the 1.3770 rising trend support seems the way to go today.
Economic data highlights will include:
G7, Mario Draghi Speech, German IFO. US Consumer Confidence, New Home Sales, Case Schiller House Price Index, Richmond Fed Mfg Activity
Jim LanglandsFX Charts www.fxcharts.com.au
