AUD/USD: 0.9335EUR/USD: 1.3660It was a wild ride in the currency markets today after the ECB cut rates, with the Euro, having dived on the initial announcement, rebounding strongly and catching a short market out badly, ending up at session highs! Yield seekers were out in force after Draghi introduced negative deposit rates and hence both the Aud and Kiwi have enjoyed good sessions, backed up in part by the US equity markets, which have made yet new all time highs. Today will be another busy session, with the US Jobs data dictating the direction and with the dollar generally looking to be under some near term downside pressure.
It has been quite a session for the Euro, and after having traded up to 1.3644 on the release of the news that the ECB had cut the refi rate to +0.15% and the deposit rate to -0.1 %, it fell sharply, to a low of 1.3502, on the announcement of further stimulus measures to stimulate economic growth in the EU, if necessary. It has since then turned around and surged higher, so far to 1.3670, before currently settling just below the highs, to finish the US session back at the 200 DMA (1.3648). The move up seemed more related to general dollar weakness than anything particularly related to the Euro.
The market appears rather undecided at these levels which way to go, and it will be today’s US Jobs data and NFP that dictates the next direction (exp NFP;218K/ Unemployment; 6.4%).
Technically, if the Euro can remain above the 200 DMA, it would have fairly bullish implications, and the first hurdle would be nearby at 1.3687 (38.2% of 1.3993.1.3502). Above this would head quickly back towards the mid May peaks in the 1.3725/35 and 1.3770/75 area, with the 50% pivot of the whole move down from 1.3993 being at 1.3746 and the 61.8% target at 1.3805.
The downside would again see buyers at around the 100/200 HMA,s currently at around 1.3615. Below 1.3600 would see another drop towards the previous supports at 1.3585 and 1.3560. It is difficult to see it down here again today unless the dollar flies higher after the NFP, but if wrong, look for a return to 1.3500 where there would be very strong buying interest.
Another violent session looks in store and a neutral stance is currently required, but it looks to me as though the market is now caught short at the lower levels and that a squeeze back to 1.3700+ could well be on the cards. A strong NFP reading though (ie 215K+) would see the dollar return to favour and we would then see it quickly back at or even below 1.36. Be nimble. In the longer term the fundamentals still point to a lower Euro, but we may need to feel more pain before that occurs.
Economic data highlights will include:
German Current Account, Industrial Production, Trade Balance, US Unemployment, NFP
Jim LanglandsFX Charts www.fxcharts.com.au
