AUD/USD: 0.9335EUR/USD: 1.3550The US$ is mildly firmer on the back of the stronger than expected US inflation data, with the market now on hold, awaiting the FOMC decision and Janet Yellen's outlook for the US economy. It should be fairly quiet until then, although we may see a bit of action in Asia from the BOJ Minutes and Japanese Trade Balance, and then in Europe, from the BOE Minutes.
The Euro made a couple of attempts to break to the topside today but failed to clear the descending trend resistance or the 200 HMA and reversed lower after the US CPI came in stronger than expected at 0.4% for May, underlining the view that the Fed might raise interest rates sooner than had been previously thought. We won’t have long to wait to find out, and the language of today’s FOMC Press Conference will give us a clue as to what Janet Yellen is thinking. A more hawkish tone will see a strong test of 1.3500, while a dovish view will see the dollar come under pressure and head back above 1.3600.
There is no change from a technical point of view and until the FOMC, the EurUsd is going to do very little.
As with yesterday, if the descending trend resistance/200 HMA at around 1.3575 can be taken out, we could see a bit of a squeeze towards 1.3590 (50% of 1.3676/1.3502) and possibly on to 1.3607 (61.8% of 1.3676/1.3502) and then on to 1.3615 (23.6% of 1.3994/1.2502) and 1.3630 (76.4% of 1.3676/1.3502). Above here, the Euro could reach up towards the 6 June high at 1.3676, which in turn lies just ahead of important Fibo resistance at 1.3687 (38.2% of 1.3994/1.2502) but I dont think will be seen unless the Fed are ultra dovish in their outlook.
On the downside, good support remains intact at the bottom of the recent range. 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 will 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, where we would be squaring up shorts and looking for a bounce. If wrong on this, 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).
Economic data highlights will include:
EU Construction Output, FOMC IR/Tapering Decision and Statement
Jim LanglandsFX Charts www.fxcharts.com.au
