AUD/USD: 0.9290EUR/USD: 1.3865The soft EU CPI was shrugged off, and the dollar came under heavy pressure following the very weak US GDP which suggested that the economy is currently at a standstill. Things could have been worse, as the ADP Jobs data was solid and gave the market some breathing space ahead of tomorrow’s NFP. Today sees the China Manufacturing PMI and then later on the UK manufacturing data. Cable reached a new 5 year high today, and a strong reading could see a run towards 1.7000, although Europe will be very thin due to the May day holiday. The US session will see the ISM and then Yellen will be speaking later in the day.
The EU CPI, slightly below expectations at 0.7% (exp 0.8%),saw a quick Euro selloff to 1.3773 against the dollar, triggering the stops below 1.3780, followed by an equally swift short covering rally back to the day’s high at around 1.3835. The market then chopped around a bit until the release of the very weak US GDP (0.1% qq v exp 1.2%) which put the dollar under further pressure, sending the Euro back towards its recent highs, reaching 1.3876, which would probably have been taken out had it not been for a reasonably solid reading from the ADP Jobs report (+220K v exp 210K), ahead of tomorrow’s NFP. The Chicago PMI was also firm (63 v exp 56.7) which assisted in preventing further damage to the dollar.
The FOMC statement was neutral suggesting little new, although the Fed did as expected and tapered by another $10bio to $45 bio per month.
The charts are beginning to look as though it may just be a matter of time before the Euro takes out 1.3875/85, although the hourly charts are now overbought, and given that it is a European Holiday today (May Day) it could be a frustrating wait. There will be a bit of action later in the day though with the ISM manufacturing report due for release, and Janet Yellen will be speaking at a bankers function.
If/when the nearby resistance is overcome, expect a quick run towards the recent high at 1.3905, above which, would lead us back towards the 13 March 1.3966 high and possibly onto 1.4000. I am not sure that we are going to see a move of this sort before the US Jobs data on Friday, and it would take a very weak NFP (exp 210K) reading to send the dollar markedly lower (higher Euro) beyond here.
In the longer term, as per Sunday’s outlook, I am still eyeing the possibility of a large wedge formation building, in which case any attempt on 1.4000 would eventually fail, for a return to the downside. Should this turn out to be incorrect, above 1.4000 could see a very quick run on towards 1.4240, but this is some way, if at all, off yet I suspect.
On the downside, bids will now be found at near-term minor support at 1.3825/35 (100/200 HMA). Back below 1.3800 would see another attempt on 1.3780 (daily Kijun 1.3787). Once again, there will be plenty of stops placed below here which could drive the Euro towards the rising trend support at 1.3760 (also 61.8% of 1.3672/1.3905). Below this would head towards 1.3730 (76.4%/100 DMA) and the daily cloud base at 1.3720. A break of 1.3700 could bring a deeper decline, and apart from some minor Fibo levels, there is not too much to hold the Euro up ahead of the 200 DMA at 1.3568.
Given the European holiday, expect it to be choppy and without much direction until the US get going today, and until then use 1.3840/1.3900 as a guide. After that, watch out for the ISM and also Janet Yellen, but it maybe that we chop around here until tomorrows’ US employment data.
Economic data highlights will include:
Labour Day Holiday, US Personal Expenditure/Consumption, ISM Mfg PMI, Yellen Speech
Jim LanglandsFX Charts www.fxcharts.com.au
