AUD/USD: 0.9395EUR/USD: 1.3610The Euro is lower today after some soft Italian data combined with concerns over the health of the Portuguese banking system which drove peripheral EU bond yields higher, pushing investors back towards the safe haven of the dollar.
Having looked relatively bid yesterday, the Euro was unable to overcome 1.3650 and eventually sank to a low of 1.3588, before recovering somewhat to sit at the recent 1.3600 pivot, with another session of similar trade looking likely today.
Having previously been suggesting that the Euro could head a bit higher, the short term indicators have now lost their positive momentum and it looks as though rallies may now be sell opportunities for an eventual retest of the downside. Today’s focus will be on the German CPI and if that is soft again, suggesting that the ECB may need to act once more to add liquidity in order to promote economic growth, then the Euro will want to take another look at its recent lows.
We are currently sitting back just above 1.3600 (daily Kijun), which could again act as a magnate, but back below the session low would see bids at 1.3575 (4 July 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 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).
On the topside, if it can take out minor Fibo resistance at 1.3650 (61.8% of 1.3700/1.3573) the Euro could then head on to 1.3670 (76.4%/ daily cloud base/200 DMA) but currently looks rather unlikely. Further out, the Euro would find sellers at 1.3700, a break which would see a run up towards 1.3730(100 DMA), which should be solid resistance although a break of this level would head on towards 1.3803 (61.8%).
For the coming session, use 1.3575/1.3630 as a guide.
Economic data highlights will include:
German CPI
Jim LanglandsFX Charts www.fxcharts.com.au
