AUD/USD: 0.9275EUR/USD: 1.3875It was rather a non event in the absence to Tokyo/London and the markets may well continue to drift sideways ahead of Janet Yellen's testimony to Congress, Wednesday, and the ECB/BOE decisions due Thursday. Today's main event will likely be the RBA decision (no change expected) with the focus being on the accompanying statement. Later in the day sees the EU/UK Services/Composite PMI, EU Retail Sales and US Trade Balance. It is again a Japan holiday.
There is really not much to add today, after a very quiet session in which soft Chinese data was more or less counterbalanced by the firmer than expected US ISM Services sector index, which rose to 55.2 (exp 54.1) in April from 53.1 in March.
Technically there is no change at all, although there will be stops building on the topside, which would seem to be destined to get taken out at some stage, which would drive the Euro a bit higher, albeit possibly very briefly. It could well be though that the market is going to drift sideways until the ECB meeting on Thursday, with only secondary data to drive it today, although the EU Retail Sales and US Trade data could cause a few waves. Ahead of the ECB, Janet Yellen’s testimony to Congress, Wednesday, will be the main focus. If she remains very dovish, the US$ will again come under pressure which could be the catalyst to trigger the stops on the topside.
Technically there is no change, so to repeat from yesterday; a break of 1.3885 would see the Euro head higher to test the stops above 1.3905 (11 April high). No change is expected from the ECB on Thursday, with June seen as a more likely time horizon for any potential easing. Should this turn out to be the case, it could well be that 1.4000 is going to come under some pressure at some stage, which would not please the ECB, in which case expect an increase in the rhetoric from Mario Draghi, and a probable easing in June.
On the downside, the initial bids will now be found at minor support at 1.3840/50 (100/200 HMA) ahead of Friday’s 1.3812 low. 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.
For today, look for another quiet session of going nowhere fast, using 1.3850/1.3900 as a guide.
In the longer term, as I have previously said, 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, then once above 1.4000, could see a very quick run on towards 1.4240 but this is some way off yet I suspect – if we see it at all.
Economic data highlights will include:
EU Services/Composite PMI, EU Retail Sales, US Trade Balance
Jim LanglandsFX Charts www.fxcharts.com.au
