AUD/USD: 0.9365EUR/USD: 1.3605The US$ is mixed today against the major currencies after the stronger US data, which comes ahead of today's important GDP reading. The commodity bloc had a tough time of it and headed lower, not helped by the S+P, which after making another all time high, then headed sharply lower to carve out a key reversal, hinting at possible further losses and, potentially, a negative outlook for risk sentiment. Other data will include German Consumer Confidence, US Durable Goods and US Services PMI. WTI has just jumped sharply from 105.90 to 107.40 in early Australian trade.
The Euro was resilient in the face of softer EU data, shrugging off a weaker than expected German IFO, which dropped to 109.7 in June (exp 110.2). It headed up to a session high of 1.3627 before some strong US data saw a reverse, sending the Euro lower, as the dollar saw good demand, trading down to 1.3583 on the news that US consumer confidence had risen strongly to 85.2 in June versus expectation of 83.6, the highest level since January 2008. Elsewhere, US new home sales surged to 504k, annualized, in May (exp 442k), the biggest rise since January 1992.
Today’s focus will be on the US GDP, but there are a large amount of option expiries, with about Eur 3.5 billion of strikes between 1.3530/1.3655, of which 1 bio are at 1.3625 and another 1 bio at 1.3650, which may combine to draw the Euro a little higher. Despite today's improved data, the GDP is expected to be a rather dismal -1.7% yy and if it comes in worse than that, it could have the dollar under some pressure, with a potential run up towards 1.3650/1.3700 a possibility.
In the meantime the Euro is back at 1.3600 and there is no change to the technical outlook. Although the short term indicators are mixed/flat, the dailies do still point higher and a retest of today’s top at 1.3627 at some stage would not really surprise, above which we could take a look at last week’s high at 1.3642. Beyond here, the Euro would then target 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). Above that, 1.3700 and then 1.3737 (50% pivot) would come into play ahead of 1.3803 (61.8%).
Back beneath Monday’s low (1.3573) would find bids at Friday’s base at 1.3564, below which would once again open up the bottom of the recent range, where 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 would be strong support. A break below 1.3500 would head towards the medium term target at the base of the rising wedge/weekly cloud top, at around 1.3430, 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 1.3400 (200 WMA), 1.3370 (50% pivot % of 1.2754/1.3995) and then to 1.3294 (7 Nov ’13 low) and 1.3260 (100 WMA).
For the coming session another day of sitting close to 1.3600, at least until the US GDP looks likely. I still think we might at some stage see a run up towards 1.3650/75, which would probably be a sell opportunity for an eventual run towards 1.3500, although it is too early for such a move I suspect.
Economic data highlights will include:
German Consumer Confidence, US GDP, Durable Goods, US Services PMI, Personal Consumption/Expenditure
Jim LanglandsFX Charts www.fxcharts.com.au
