AUD/USD: 0.9235EUR/USD: 1.3620 It was a rather lame finish to the week, although the dollar generally squeezed a bit higher after the Euro came under pressure following the weak German IFO. It looks like being a quiet session today, given the holiday's in the UK and the US, and with little data out aside from the BOJ Minutes to provide any excitement, I don't think the majors are going anywhere too far. EU exit polls show a major swing to the extreme parties which could keep the Euro under pressure this week. Aud and Kiwi are both sitting above some important support, which if it gives way could see some action, but looks unlikely today. NZ Trade Balance coming up. Mario Draghi speaking later today.
The euro fell to a low of 1.3615 on Friday after the soft German IFO report on business sentiment reiterated the underlying view that the ECB will probably cut rates and next month’s meeting.
Adding to the weight on the Euro were concerns that the weekend EU election results could see a prominent showing by some of the more radical parties, potentially destabilising certain EZ governments such as Greece and Italy. That remains to be seen, but the early results have so far seen the far right take a high percentage of the vote in France, Denmark and Austria, while the extreme left wing topped the exit polls in Greece. The Euro could be on shaky ground later in the week once the final votes have been counted, and in the meantime, keep an eye out for Mario Draghi who will be speaking at the ECB Central Banking forum later today.
Technically, the Euro closed the week right on the support at the 200 DMA at 1.3630 and while the indicators mostly point lower, with a holiday both in the UK and the US today, the action is likely to be pretty limited and it could be rather a slow process.
If we do see any sort of move, the next level of support will be at 1.3595 (76.4% of 1.3475/1.3995), below which the Euro would head towards 1.3560 (minor) and 1.3520 (38.2% of 1.2754/1.3995).
In the bigger picture, as we have said previously, I suspect that we are in a large wedge formation (see chart below; blue lines), the downside objective of which has now risen to 1.3400, roughly where the 200 WMA also lies.
On the topside, the initial resistance will arrive at around 1.3650 (minor) and then at 1.3675 (100 HMA) and at 1.3690 (200 HMA). Beyond here, the 100 DMA is at 1.3730, but is looking increasingly out of sight.
For the coming session, use 1.3600/50 as a guide to trade from, but it could easily be well within that range, given the holidays in the UK, US. Selling rallies still seems to be the way to go, and we can expect more rhetoric from the ECB to try and push it lower ahead of the June meeting.
Economic data highlights will include:
M: US Public Holiday, German Consumer Confidence, Draghi Speech.
T: US Durable Goods Orders, Case/Schiller House Price Index, Consumer Confidence, Richmond/Dallas Fed Mfg Indices, Services PMI
W: German Unemployment, EU Business Climate, Consumer/Industrial Confidence,
T: Ascension Day Holiday – EU, US GDP (Provisional), Pending Home Sales,
F: German Retail Sales, US Personal Consumption/Expenditure, Chicago PMI, Rts/Michigan Consumer Sentiment Index
Jim LanglandsFX Charts www.fxcharts.com.au
