AUD/USD: 0.9355EUR/USD: 1.3710Mixed data from both Europe and the US caused plenty of volatility today albeit that most currency pairs have ended up not too far from where they started. Equities generally headed lower as did commodities. Given the comparative lack of data today, it may be a reasonably quiet session heading into the weekend with EU Trade and US Housing data likely to be the session highlights. Have a good w/e.
The Euro headed lower in Europe after a flurry of soft data, including the EU GDP which grew by only 0.2% qq in Q1, (exp 4% qq) , adding to expectations of a June ECB rate cut. France, Italy, Finland Portugal and Holland were all weak, while, as usual, Germany propped the team up by coming in stronger than expected (0.8% v exp 0.7%). Later on, the solid US Jobless claims and higher US CPI (2.0%yy) added to the dollar’s strength sending the Euro down to a low of 1.3648 before a quick turnaround as the market digested the soft US Housing, IP and Capacity Utilisation data that brought about a steep fall in US yields, and some heavy short covering, that sent the Euro up to a session high of 1.3732, before stabalising close to 1.3700 at the US close..
Technically, the downside move may have completed in the short term, with both the 1 and 4 hour charts pointing higher and a retest of 1.3730/40 (100HMA/100 DMA) at some stage today would not surprise. This should prove quite strong resistance, although a break would hint at a run up towards 1.3780 (38.2% of 1.3995/1.3648) and potentially to 1.3800 (200 HMA: 1.3807).
On the downside, which looks a little less likely today, dips should again be seen at around 1.3670 and then again at the day’s low at around 1.3650.
Further out though, the dailies still point lower and once the short term charts have unwound their upside momentum, I think we will probably need to take a look at the 200 DMA (1.3620) and then 1.3595 (76.4% of 1.3475/1.3995). In the bigger picture, as I pointed out previously, I suspect that we are in a large wedge formation, the downside objective of which is at 1.3375.
Today is fairly free of data, and a session of consolidation would not surprise, but given the growing positive momentum of the 4 hour charts, I suspect that buying dips today may be the strategy, albeit I would be square ahead of the w/e.
Use 1.3680/1.3750 as a guide
Economic data highlights will include:
EU Trade Balance, US Building Permits, Housing Starts, Rts/Michigan Consumer Sentiment index
Jim LanglandsFX Charts www.fxcharts.com.au
