AUD/USD: 0.9340EUR/USD: 1.3645Holiday markets have ensured thin conditions and little volatility. That could change later when the UK/US start their week and they will have the chance to digest the EU election results and Mario Draghi's reiteration that the ECB are ready to act to ease rates as/when necessary. Not much data ahead of the US session is due, when the Durable Goods will be the highlight. Draghi will also be speaking again.
With both the UK and the US on holiday the markets have done little on most fronts, which is a little surprising, given the results in the EU elections that have generally seen the more extreme parties make good grounds on most fronts. These have been followed up by the ECB President Mario Draghi, who further outlined the case for a June easing, by indicating the concerns of the ECB of the increasing chances of deflation in the EU so we could see a bit of action once the European markets get going later today.
The Euro did make a 3 month low in early Asia at 1.3606 but has since bounced and is actually a little higher than when it started the day. The 4 hour charts do suggest that we could even see it squeeze higher yet and should that be the case, the initial resistance will be seen at around 1.3655 (100 HMA) and then at 1.3680 (200 HMA) and 1.3695 (23.6% of 1.3995/1.3606). Beyond here, the 100 DMA is at 1.3735, but I am not sure that we are heading up here today, given that the dailies still point strongly lower, and that any near term strength that we may see towards 1.3700 is most likely a sell opportunity.
The initial support is at the 200 DMA, now at 1.3640, which may continue to act as a pivot, and then at the session low at 1.3606. Below here 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.
Today sees plenty of US data, headed by the Durable Goods. It may be a bit quiet until then unless the European markets react vigorously to Draghi's remarks, but I still prefer selling rallies and today would use 1.3600/75 as a guide.
Draghi will again be speaking and may be the catalyst to push the Euro lower if he reiterates his comments on possible ECB action.
Economic data highlights will include:
US Durable Goods Orders, Case/Schiller House Price Index, Consumer Confidence, Richmond/Dallas Fed Mfg Indices, Services PMI, Draghi Speech
Jim LanglandsFX Charts www.fxcharts.com.au
