AUD/USD: 0.9420EUR/USD: 1.3650The US$ remained under pressure at the end of the week with traders generally assuming no action from the Fed to hike rates for quite some time to come, certainly not in the next 6 months. The coming week, although shortened by the US (July 4) holiday, will be a busy one, starting today with the German Retail Sales, EU CPI, Chicago PMI and US Pending Home Sales. As we progress through the week, we have the RBA, Japanese Tankan and global manufacturing PMI's tomorrow, the EU GDP on Wednesday and then on Thursday, the double whammy of the ECB Rate decision/press statement and the NFP, all due at the same time. Could be a busy one! Good Luck.
The dollar remained under pressure on all fronts heading into the weekend with Friday's Reuters/Michigan consumer confidence data, ensuring that the dollar would receive no reprieve from traders, who are not able to see anything to change the general view that the Fed are unlikely to hike rates for quite a while to come..
The DXY headed back to finish at 80.03 as the Euro drifted up, to finish the week with its strongest close against the dollar since the ECB introduced negative deposit rates at their last meeting and looks to be under further pressure (see DXY report) in the days to come.
The coming week, although shortened by Friday’s US Independence Day long w/e, will be a huge one for data, with highlights starting today wit the EU CPI. Tomorrow sees the EU Jobs numbers and global PMI’s and then on Wednesday we have the EU GDP. On Thursday we will have the July ECB IR decision and the US Jobs/NFP data coming out at the same time! Plenty of room for confusion, although no action is expected from the ECB this month following on from the June cut, and a press story on Friday suggested that the ECB will now remain on hold for 6-9 months.
Technically the Euro continues to drift slowly higher and although it finished on its highs, it has yet to break above 1.3650. The daily charts look positive though, and if 1.3650 can be taken out the Euro could well head on towards the 200 DMA at 1.3670 and then 6 June high at 1.3676, which should prove strong resistance. A break of this area would see further sellers at Fibo resistance at 1.3687 (38.2% of 1.3994/1.2502) ahead of 1.3700. Beyond there, 1.3737 (50% pivot/100 DMA/daily cloud base) would come into play, ahead of 1.3803 (61.8%).
The immediate support now comes at Friday’s day’s low of 1.3608 and then at 1.3600 where the minor rising trend support lies. A break of 1.3600 would head to last Thursday’s low at 1.3573 and then to various minor support levels ahead of the Fibo support at 1.3518 (38.2% of 1.2754/1.3995) which will again provide strong support ahead of the post-ECB spike low at 1.3502. A break below 1.3500 would head towards the medium term target at the base of the rising wedge/weekly cloud top, at around 1.3460, 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).
I suspect the slow grind higher will continue early in the coming week, but would be looking to sell into strength at around 1.3700, should we see it for an eventual return to the downside. A weak NFP (exp +213K, 6.3%) on Friday though, would see the dollar remain under pressure, so possibly playing it from the long side (long Eur/short US$) maybe the way to go until then.
Economic data highlights will include:
M: German Retail Sales, EU CPI, Chicago PMI, Pending Home Sales
T: German, EU Unemployment, EU Mfg PMI, US Markit, ISM Mfg PMI
W: EU GDP, PPI, US ADP Employment, Factory Orders
T: EU Services, Composite PMI’s, Retail Sales, ECB IR Decision/Press Conference, US Unemployment/NFP, Trade Balance, Services, Composite, Non Mfg PMI’s
F: German Factory Orders. US Independence Day
Jim LanglandsFX Charts www.fxcharts.com.au
