AUD/USD: 0.9360EUR/USD: 1.3760The focus was on the Dow/S&P today, which both made new all time highs, while the currencies marked time ahead of the week's increasing data flow. Today sees the EU/German ZEW Economic Sentiment and US Retail Sales while ahead of that, Asia gets the China Industrial Production, Retail Sales and Urban Investment. The Australian focus will be on the Federal Budget (7.30 AET), but before that the Home Loans and House Price Index will be released.
The markets have been relatively stable on Monday, but while the short term charts unwind their oversold condition the preference remains to sell rallies, looking for an eventual break to the downside for a test of levels towards 1.3600.
A weak ZEW today, which would add to the conviction of a June ECB rate cut, and/or a stronger than expected US Retail sales reading could be the catalyst for such a move, and in the meantime the technicals are little changed.
Before the chance of any deeper decline, the 4 hour indicators are yet to recover from their oversold condition and still suggest that we could see more of a squeeze to the topside. If that is the case, today’s top at 1.3775 will again provide minor resistance ahead of 1.3800. Further sellers will arrive at 1.3835 (38.2% of 1.3995/1.3745) and then at the 100/200 HMA’s at 1.3850/60. I would be surprised to see the Euro much above here again in the next few days but would leave stops above 1.3885.
Technically, below the session 1.3745 low, the 100 DMA at 1.3735 provides the initial support, which should be strong. 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. Below here the 200 DMA would eventually see good bids at around 1.3620, where I would be squaring up any shorts.
For the time being I suspect that leaving sell orders near 1.3800 is the way to go and for the coming session would use 1.3735/1.3800 as a guide. If the ZEW is strong, a short squeeze could take the Euro a bit higher towards 1.3830, so keep the stops in place above 1.3885.
Economic data highlights will include:
EU/German ZEW Economic Sentiment, US Retail Sales
Jim LanglandsFX Charts www.fxcharts.com.au
