AUD/USD: 0.9430EUR/USD: 1.3690The US$ and bond yields remained under heavy pressure today as weak sentiment for the outlook of the US economy continued to be the dominant driver. Today’s global PMI’s will provide further guidance, with the US ISM manufacturing number being a key focus. Asia will look to the China manufacturing numbers and then the RBA statement to provide direction, while Europe will get the German and EU Unemployment figures, on top of the PMI’s.
The dollar remained soft today, with the Euro ignoring the weak German retail sales and taking some solace from the fact that the EU CPI was no weaker than expected, and is closing the NY session near its highs. Quarter-end dollar selling and some dovish Fed talk helped to keep it under pressure, as did US yields, with the 10 year bond trading down to 2.53%. US Pending Home Sales were a fair bit better than expected but did little to revive the dollar because the Chicago purchasing managers’ index declined to 62.6 from 65.5 in May, missing expectations of 63.0.
Today will be another busy session for data and sees the EU and US manufacturing PMI’s. If the US ISM is softer than expected it looks as though the dollar could take another hit.
The Euro, for its part, has taken out the 200 DMA (1.3670) and the Fibo resistance at 1.3687 (38.2% of 1.3994/1.2502) having reached a high so far of 1.3693, stalling just ahead of 1.3700. A break of 1.3700 would see a run up towards 1.3737 (50% pivot/100 DMA/daily cloud base), which should be solid resistance although a break of this level would head on towards 1.3803 (61.8%).
The downside would see the 200 DMA act as the first support, a break of which would head back towards 1.3640 and then to Friday’s day’s low of 1.3608 and to 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).
Further upside for the Euro looks possible today, given that the 4 hour and daily indicators are pointing higher, although the hourlies are now becoming overbought so we may need to consolidate for a while before making any real progress beyond 1.3700.
Use 1.3675/1.3730 as a guide today, with not too much action looking likely ahead of the ISM, although the EU PMI’s may decide otherwise if they differ greatly from expectations.
The DXY is at 79.82, down 0.3% having earlier t hit an eight-week low earlier at 79.76 and looks as though it could give the 200 WMA at 79.57 a run for its money.
Economic data highlights will include:
German, EU Unemployment, EU Mfg PMI, US Markit, ISM Mfg PMI
Jim LanglandsFX Charts www.fxcharts.com.au
