AUD/USD: 0.9230EUR/USD: 1.3715The ECB, having left rates unchanged, stated that it is prepared to take action to combat low inflation/growth, sending the Euro lower. Elsewhere, the US$ is mixed, although Cable is weaker following soft UK data. Markets look set to remain steady until the US Jobs data/NFP later today, at which an improved reading is generally expected following the recent weather-related under-performance of the last couple of months.
The euro fell to a 5 week low against the dollar today, after Mario Draghi reiterated that the ECB is prepared to take action to stave off the risk of deflation in the EZ despite leaving rates unchanged. He added that the Euro’s exchange rate is an increasingly important factor in the bank’s medium-term assessment, causing an immediate spike to the downside, although the bids at around 1.3700 are currently holding.
The market is now likely to hang around here until the US Jobs data later on today, where the expectations are for a rise of 200K (Deutsche Bank expects 275K).
While 1.3700 holds, then we could yet see a bit of a squeeze higher in the Euro as shorts cover ahead of the NFP, but the 4 hour and daily charts do point lower and therefore, if/when this support does give way, we should expect further dips towards 1.3680/85 which should prove strong. This is where several technical levels converge, including the top of the daily cloud, the 100 DMA, 23.6% retracement of 1.2753/1.3966 and the rising trend support from the 1.2753 low. A break of this though, would head back towards the Fibo support at 1.3660 (61.8% of 1.3475/1.3966) below which, the 27 Feb low at 1.3643 will come into view ahead of the 76.4% Fibo support at 1.3595.
On the topside, minor resistance will arrive at 1.3750 ahead of further sellers that will be seen near the 100/200 HMA’s at around 1.3770/75. It looks unlikely that we will head much above here today, and I don’t think we are going to see 1.3800 unless the NFP badly misses expectations. The resistance above 1.3800 remains strong, with 1.3808 (1.3803: Daily Kijun, 38.2% of 1.3966/1.3704) and 1.3820 (Daily Tenkan) providing the initial hurdles ahead of 1.3833 (50% pivot of 1.3966/1.3704). A break of this would see a move on towards 1.3865 (61.8%) and the recent spike high at 1.3875. I cannot really see this being tested again for a while, but beyond there would head towards 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.
Selling rallies looks to be the way of it, but the downside will see strong bids, so overall, I suspect the price action will be choppy. Before the NFP, German Factory Orders may provide some volatility.
Economic data highlights will include:
German Factory Orders, US Employment, NFP
Jim LanglandsFX Charts www.fxcharts.com.au
