AUD/USD: 0.9360EUR/USD: 1.3750The Euro continues to retreat from Thursday's 2 1/2 year high following Mario Draghi's hint at a possible June easing by the ECB, dragging the Chf and Gbp down with it, and it looks as though there may be more to come. The commodity currencies were steady, as was US$/Yen, although all the crosses saw a bit of action with both the Yen and Aud making good gains. This week sees plenty of data, including CPI and GDP from both the EU & US, although Monday is a bit thin and may seem some consolidation. As for Asia, Australia's Federal Budget on Tuesday will be in focus, as will various bits and pieces from China, Tuesday. Monday sees the NAB Business Confidence/Conditions.
The US$ had a good session on Friday against most currencies, with the Euro coming under further pressure, after ECB President Mario Draghi had hinted on Thursday at a possible June easing in the EU, that had seen it reverse sharply from the 2 ½ year 1.3995 high. There are several ECB speakers due this week who could well reiterate Draghis’s remarks, keeping the pressure to the downside.
The longer term indicators are now pointing a bit lower and the pressure looks as though it could still be to the downside as far as the Euro is concerned, with the key drivers in the coming week being the German/EU ZEW and US Retail Sales (Tuesday), the German CPI (Wednesday), and then a whole host of data on Thursday, headed by the ECB monthly Report, EU/German CPI and the EU/US GDP.
Technically the Euro has come to rest on the 100 DMA, which could provide some early support, particularly as the 1 & 4 hour charts are at oversold extremes and need to be allowed to recover their balance. A break of the 100 DMA will find bids at the base of the daily cloud at 1.3720, and then below 1.3700(23.6% of 1.2753/1.3995), at the 4th April low at 1.3675 and the weekly Kijun, at 1.3670.
Although the dailies are pointing lower now, it would not surprise to see a bit of a short squeeze as the week progresses, if only to allow the short term charts to unwind. The upside will find sellers at minor resistance at 1.3775 and again at 1.3800. I am not sure that we are heading too much above here today, but further resistance will arrive at 1.3835 (38.2% of 1.3995/1.3745) and then at the 200 HMA at 1.3870.
While the dailies do point lower - and I prefer to sell rallies in the Euro, - the US has plenty of issues of its own, and Janet Yellen was still extremely conservative in her outlook for US economic growth in her testimony last week to Congress, so I don’t think we should be getting too carried away with the current bout of dollar strength. The first soft US reading from the CPI or the GDP this week could once again see the dollar on the back foot, but in the meantime I prefer to trade the Euro from the short side, looking for an eventual run towards 1.3670/80.
For Monday, look for the possibility of a minor squeeze towards 1.3800 and maybe use 1.3725/90 as a guide to the range.
Economic data highlights will include:
M: US monthly Budget Statement
T: EU/German ZEW Economic Sentiment, US Retail Sales
W: German CPI, EU Industrial Production US PPI
T: EU Council Meeting, ECB Monthly Report, German GDP, EU CPI, GDP, US CPI, NY Empire State Mfg Index, Industrial Production, Capacity Utilisation, NAHB Housing Index, Philly Fed Mfg Survey
F: EU Trade Balance, US Building Permits, Housing Starts, Rts/Michigan Consumer Sentiment index
Jim LanglandsFX Charts www.fxcharts.com.au
