AUD/USD: 0.9250EUR/USD: 1.3685The FOMC Minutes suggested that the Fed will keep tapering its stimulus programme but that no interest rate hikes are on the horizon while inflation remains benign. This generally helped to underpin the dollar ahead of today's global PMI data, starting off in Asia with the HSBC China reading. Elsewhere, the main action was in Cable, which went higher on the back of the solid UK retail sales, and could see another busy session today, after the release of the provisional Q1 GDP data. Australia, NZ both get inflation outlook data
The Euro saw a bit of action today, initially heading a little higher to reach 1.3722 before heading in the other direction in European trade, eventually reaching a low of 1.3633, as stops were triggered prior to the release of the FOMC Minutes, and then bouncing sharply back towards 1.3680. The Minutes themselves did not really come up with anything new, except to reinforce the view that tapering will probably be wound up before the end of the year, although rate hikes are not on the agenda yet as no inflationary risks have so far become evident.
Technically the base of the daily cloud at 1.3720 did a good job of capping the Euro today, while the 200 DMA at 1.3630 contained it at the lows, and given the mixed nature of the short term indicators it could well be that this range again holds it today.
While the dailies point lower, it does not appear that the Euro has the short term momentum to head much below 1.3630 in the coming session, but if wrong, look for 1.3595 (76.4% of 1.3475/1.3995) to provide some support, below which would head towards 1.3560 (minor) and 1.3520 (38.2%) of 1.2754/1.3995.
On the topside, minor sellers will appear at 1.3700, with stronger interest at 1.3720 (daily cloud base). Beyond this the 200 DMA and daily Tenkan both sit at 1.3735 and I would be surprised to see the Euro head above this. If wrong, further sellers should appear at 1.3750 and at 1.3780.
Use 1.3710/1.3630 as a guide, with a preference to sell rallies again for an eventual return/break of 1.3630. The flash PMI’s are due later today and these will provide some volatility, but unless the EU figures are particularly weak, I suspect we are in for a choppy day around current levels. A very weak reading though would reinforce the case for a June ECB rate cut and would see the Euro head lower once more.
Economic data highlights will include:
EU Flash Mfg/Services/Composite PMI’s, Chicago/Kansas Fed Mfg Activity, Flash Mfg PMI, Existing Home Sales
Jim LanglandsFX Charts www.fxcharts.com.au
