AUD/USD: 0.9275EUR/USD: 1.3600The market is pretty much sitting on its hands until the ECB interest rate decision (11.45 GMT) and Press Conference (12.30 GMT)due later in the coming session. Most currencies are pretty much rangebound although both the Yen and Kiwi remain under some pressure. There will be plenty of fireworks later on, although it will be comatose until then, so find something else to do! A good day for catching up with the admin!
There is little to add today as the markets await the upcoming I/R decision by the ECB, with a cut widely expected, and until then the Euro will hold close to 1.3600. The EU Services PMI was revised lower to 53.2 in May (exp 53.5) while the GDP came in as expected at +0.2% but had little lasting effect on the price action.
The US ADP jobs report rose by 179K in May, well below expectations for an increase of 210K. The April figure was revised down to a gain of 215K from 220K, which perhaps does not bode particularly well for tomorrows NFP reading (exp +218K), although the correlation between the ADP and the NFP has not been particularly close in recent times, but it managed to keep a cap on any dollar gains today.
Technically there is no change, yet again, although there will be plenty fireworks once the ECB have acted and Mario Draghi has spoken.
If the ECB are aggressive today, the Euro will head sharply lower, and on the downside, below 1.3596 (76.4% of 1.3475/1.3995) would head to the strong support at 1.3585. Below here would see a drop towards 1.3560 (27 Feb low) and then to 1.3520 (38.2% of 1.2754/1.3995). The base of the rising wedge support is now at 1.3440 (blue line-charts below), which ties in nicely with the top of the weekly cloud and if seen would be where I would be squaring up short positions.
If the ECB fails to back up its recent rhetoric, with the market now heavily short, then we are going to see a nasty spike higher in the Euro. Back above today’s high at 1.3638 (daily Tenkan) and 1.3644 (200 DMA), then look for a run up to last week’s high of 1.3668. The first Fibo level to watch is at 1.3680 (23.6% of 1.3993/1.3585), a break of which could head on to 1.3700 and 1.3739 (38.2%/100 DMA). The base of the daily cloud is not seen until 1.3800.
While the short term indicators are mixed, the dailies looks as though they are actually turning to point a bit higher, and if short, I think I would have my take profit orders in ahead of the announcement. We could see a quick spike lower followed by a heavy bout of short covering, which could drive the Euro quickly higher once again. Whatever the outcome it is going to be very volatile so be nimble!
Economic data highlights will include:
French Unemployment, German Factory Orders, EU Retail Sales, ECB IR Decision/Press Conference
Jim LanglandsFX Charts www.fxcharts.com.au
