AUD/USD: 0.9410EUR/USD: 1.3640The dollar is generally a little weaker following the release of the FOMC minutes, which contained no mention of any impending rate hikes, despite the mildly more hawkish tone suggesting that tapering is likely to finish in October. Today's key focus will be initially in Asia, where we get the NZ Business PMI, Australian Jobs data, Chinese Trade data am]ns the BOJ IR decision/statement. Later on the ECB Monthly Report, US Jobless Claims and Wholesale Inventories will the main drivers, while from the UK we get the BOE meeting.
The Euro is a little higher despite the mildly more hawkish tone from the FOMC Minutes, at which the Fed announced that tapering is likely to finish in October if the economy continues on its trajectory of ongoing jobs growth and low inflation. However, the minutes gave no mention of any likelihood of an imminent rate rise, which helped erase any further dollar gains and allowed the Euro to head a little higher. A speech from Mario Draghi also failed to spark any enthusiasm to send the Euro lower, despite him reiterating the accommodative bias of the ECB and the possibility of some form of quantative easing . The price action after the release of the minutes was choppy, with the dollar initially strengthening, to test the 1.3600 support, before turning lower to push the Euro to session highs, near 1.3650.
Technically, the short term charts appear to suggest that the Euro could continue to head a bit higher, and given the overwhelmingly bearish view on the Euro, a short squeeze would not really surprise. If it can take out minor Fibo resistance at 1.3650 (61.8% of 1.3700/1.3573) it could then head on to 1.3670 (76.4%). Further out, the Euro would find sellers at 1.3700/10 (200 DMA; 1.3710), a break which would see a run up towards 1.3730/37 (100 DMA/daily cloud base), which should be solid resistance although a break of this level would head on towards 1.3803 (61.8%).
Back to the downside, which looks a little less likely today, bids will be once again seen at 1.3600 (daily Kijun), below there which would suggest a retest of the minor double bottom at around 1.3575 (Thursday low 1.3573). Beyond there would head towards 1.3557 (76.4%) a break of which would head to the greater degree of Fibo support at 1.3518 (38.2% of 1.2754/1.3995) but which looks unlikely to be seen today. If wrong, a break lower would see good bids ahead of the post-ECB spike low at 1.3502. The base of the rising wedge now lies at around these levels as well, so if we see 1.3500 I think I would be squaring up short positions at the first attempt to break through it, as it should be strong support. If wrong on this, a break of the wedge base would hint at a further move south towards 1.3415 (200 WMA), 1.3370 (50% pivot % of 1.2754/1.3995) and then to 1.3300 (100 WMA) and 1.3294 (7 Nov ’13 low).
Given that there is not too much data out today, the Euro may end up close to current levels, but I do suspect that we are going to squeeze a little higher at some stage, and for today would use 1.3620/70 as a guide. The market is short, so while I also think the Euro will eventually head lower, I think it is going to be a frustrating wait and would look for levels above 1.3700 before selling into any rally.
Economic data highlights will include:
ECB Monthly Report, US Jobless Claims, Whole sale Inventories
Jim LanglandsFX Charts www.fxcharts.com.au
