AUD/USD: 0.9370EUR/USD: 1.3545 The Euro was again under pressure today, giving up last week's late gains and dragging the other Euro majors lower, with the dollar being the major beneficiary as traders eyed firmer US Treasury yields. The Aud and Kiwi also both performed well as yield players underpinned demand for the carry trade. In the absence of any major data today it could be one of consolidation with the session highlights likely to be the WBC Australian Consumer Confidence and the UK Unemployment data.
The Euro faced another selloff in early Europe and has now given up most of the gains from last week’s bounce following the ECB easing. Reasons for the move have been pointed at an ECB Board member (Finnish central bank Governor, Liikanen), who noted the impact of a prolonged period of low inflation and reiterated the ECB's "determination and capacity to act." Elsewhere leveraged names were noted sellers, on the back of market talk regarding the impact of potential reserve-manager sales of the Euro due to negative deposit rates.
Technically, the hourly charts are now at oversold extremes and are trying to turn a bit higher, and with no data due once again from the EU or the US, it looks as though it may be a session of consolidation, with the chance of a minor short squeeze.
There has been precious little bounce so far from the 1.3533 low though, and it could be that we just hang around here for much of the day, but if the Euro does find some buying interest, it may head towards minor Fibo resistance at 1.3565 and 1.3585. Above 1.3600, the 100/200 HMA’s are crossing lower at 1.3610, but looks as though it may be a stretch too far today.
The 4 hour and daily charts do not look positive though, and any short term rally would appear to be a sell opportunity for a run below today’s 1.3533 low, towards 1.3518 (38.2% of 1.2754/1.3995) and then to Friday’s spike low at 1.3502. Below 1.3500 would see an acceleration towards our medium term target at the base of the rising wedge, at around 1.3440 (daily chart below), where we would be squaring up shorts and looking for a bounce, but is unlikely to be seen today. A break of the wedge base though, would hint at a further move south towards 1.3370 (50% pivot % of 1.2754/1.3995) and then to 1.3294 (7 Nov ’13 low).
Note that the DXY; 80.80 appears to be building increasing positive momentum, but really needs to overcome 81.20 to give confidence to sustained dollar gains.
For today look for 1.3520/1.3570 to cover it with a preference to selling into strength.
Jim LanglandsFX Charts www.fxcharts.com.au
