AUD/USD: 0.9380EUR/USD: 1.3605While most currencies remain rangebound, yen strength was an underlying theme following the news that a Portuguese bank had missed a debt repayment late week. The coming week will be busy, with the highlight being Janet Yellen's testimony to Congress. Other important events will include the China Q2 GDP, US Retail Sales (Tues), UK CPI (Wed) and EU CPI (Thur). Mario Draghi will be speaking later today, which may cause the Euro to come under some pressure, should he address the possibility of further accommodative measures to promote increased economic growth in the EU.
There is little to add on the Euro at the start of the week as it continues to hug close to 1.3600, which appears as though will be the case over the next few days,especially as interest in the northern hemisphere turns more to summer holidays than in trading 30 point ranges such as we saw on Friday. The Portuguese banking concerns, seen last Thursday, were put to one side but they have not gone away and could yet come back to weigh on the Euro.
The coming week will produce some data that could provide some volatility, with the ZEW and US Retail Sales (Tues), and the EU CPI (Thurs) being the probable highlights, along with Janet Yellen’s testimony to Congress on Tuesday, where she will be outlining her view on the state of the economy. The US also gets the PPI (Wed) and Housing data (Thur) next week and if this all adds up to a firmer growth outlook it will have the market second guessing as to the chances of a Fed rate hike, so Janet Yellen’s thoughts will be closely monitored and may see the dollar take a stronger tone over the course of the coming week. The market will be hoping for her to be more upbeat than recently, but more likely, I suspect that she will remain extremely cautious, taking the wind out of the sails of the dollar bulls once again. Before then, Mario Draghi will be speaking today , testifying on monetary policy to the Committee on Economic and Monetary Affairs of the European Parliament, and he may do the Euro bears a favour by talking the it lower, reiterating once more, the possibility of some form of QE from the ECB, so keep an eye out for that.
As before, the technical points on both sides remain unchanged and given that the longer term indicators look pretty flat, I suspect the overall outlook for the week will be another one of choppy but directionless trade.
We are currently sitting back just above 1.3600 (daily Kijun) and minor rising trend support, now at around 1.3590, below which would see more 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, the 200 HMA is now at 1.3620 and this may prove difficult to break today. If it does head higher though and can take out the minor Fibo resistance at 1.3652 (61.8% of 1.3700/1.3573), the Euro could then head on to 1.3670 (76.4%/ daily cloud base/200 DMA). Further out, it 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 today, use 1.3585/1.3620 as a rough guide. The DXY does suggest that there is room for an underlying bid tone to the dollar over the next few days, albeit nothing very sgnificant.
Many the US financial houses release their Q2 results this week which will be worth keeping an eye on.
Economic data highlights will include:
M: French Holiday, EU Industrial production, Draghi speech
T: ZEW Survey, US Retail Sales, NY Empire Mfg Index, Yellen testifies to Congress.
W: EU Trade Balance, US PPI, Industrial production, Capacity Utilisation
T: EU CPI, US Building permits, Housing Starts, Jobless claims
F: EU Current Account, Rts/Michigan Consumer Sentiment Index.
Jim LanglandsFX Charts www.fxcharts.com.au
