AUD/USD: 0.9400EUR/USD: 1.3540The currency markets had a relatively quiet Friday, apart from Cable which rocketed higher after Mark Carney's Mansion House speech suggested the possibility of an early BOE rate hike. Equities and Commodities were both firm, ahead of Wednesday's FOMC decision. Ahead of that, it looks as though the market will be watching events unfold in Iraq. Today could be busy with the EU CPI to kick things off, followed by the US NY State Mfg Index, US Industrial Production, Capacity Utilisation & NAHB Housing Index
The Euro had a quiet end to the week consolidating above the solid bids in the 1.35oo-20 area but the price action was unable to head above the sizeable offers placed at 1.3580 and higher, and it is beginning to look as though we may be in for a stronger test of the downside in the days ahead.
Little has changed technically and although the short term charts are somewhat indecisive, the daily charts continue to point lower. The Fibo support at 1.3518 (38.2% of 1.2754/1.3995) will again find bids ahead of the post-ECB spike low at 1.3502, which should again be strong support. A break below 1.3500 would head towards the 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 think that this is unlikely to be seen today. A break of the wedge base 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).
Above the 100 Hour MA at 1.3550, Fridays top at 1.3570/75 will be the immediate resistance, a break of which would advance to further minor resistance levels at 1.3590 where the 200 HMA may well contain it, but a break of which would head on to 1.3607 (61.8% of 1.3676/1.3502) and then on to 1.3630 (76.4%).
The EU CPI is due today (exp +0.5% yy, -0.1%mm) and if below expectations could have the Euro under some pressure. Once the US comes in, the Industrial Production, Capacity Ultilisation and the Housing Index will likely be the main focus.
I suspect that for the coming session we may be in for more chopping around current levels, although we may see a more rigorous test of 1.3520 but I would expect 1.3500 to hold again today. The consolidation may well continue for a couple of sessions, but at some stage I suspect that we are in for a test of levels sub 1.3500 and then possibly followed by a bounce later in the week if Janet Yellen retains here dovish stance, thus putting the dollar back under pressure.
Economic data highlights will include:
M: EU CPI, US NY State Mfg Index, TIC Flows, US Industrial Production, Capacity Utilisation, NAHB Housing Index
T: EU/German ZEW Economic Sentiment/Current Situation, US CPI
W: EU Construction Output, FOMC IR/Tapering Decision and Statement
T: Eurogroup Meeting, US Jobless Claims, Philly Fed Mfg Survey, CB Leading Indicator
F: EcoFin Meeting, EU Current Account, Consumer Confidence, German PPI
Jim LanglandsFX Charts www.fxcharts.com.au
