AUD/USD: 0.9395EUR/USD: 1.3620Mario Draghi comments (accommodative policy to stay etc.) helped European equity markets higher today and this flowed through to the US indices - and risk sentiment generally - ahead of Janet Yellen's testimony to Congress later in the coming session. Currency markets remain steady, although the US$ does have a mildly bid tone. The big movers were Gold & Silver, which both headed lower. It could be a busy session coming up; Aside from Yellen, Asia will kick things off with the RBA Minutes, ahead of the EU ZEW Economic Sentiment Survey and the UK Inflation data. The US Retail Sales will also be released but by then everyone will be hanging on what JY has to say in the Q&A session.
The Euro jumped a little higher on the back of a firmer start in the European equity markets and also because of some decent buying from real money managers, reaching 1.3639, before the soft EU Industrial production data put a cap on it. (May IP -1.1% vs -1.2% exp m/m). That was as good as it got for the Euro and it drifted back towards 1.3610, assisted somewhat by comments from the IMF that the ECB should consider using QE in the current low inflation environment. These comments were backed up by Mario Draghi, testifying to the EU parliament, where he also noted that the high Euro remains a hurdle to any sustained economic recovery. Sounds like a hint of what is to come, to me, although the effect so far has been minimal.
Currently sitting at 1.3620, the markets are now all pretty much on hold for Janet Yellen’s testimony to Congress later today, where the Q&A session will test her on when rates may rise given the recent upturn in the US economic numbers.
Ahead of Yellen, the EU/German ZEW Economic Sentiment Survey and the US Retail Sales may provide some minor waves, but the focus will be on JY.
In the meantime, the technical points remain pretty much unchanged, so for those who need reminding:
On the topside, the offers in the 1.3640/50 area remain solid, where the minor Fibo resistance at 1.3652 (61.8% of 1.3700/1.3573) is capping it, but a break of which would see the Euro 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%).
On the downside, the initial support remains at 1.3600 (daily Kijun) and at the the minor rising trend support, now at around 1.3595, below which would head towards 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).
The indicators are generally pretty flat and a neutral stance is required, but a more hawkish tone from Janet Yellen in the Q+A will see a run towards 1.3550 and possibly to 1.3500. That remains to be seen.
Economic data highlights will include:
ZEW Survey, US Retail Sales, NY Empire Mfg Index, Yellen testifies to Congress
Jim LanglandsFX Charts www.fxcharts.com.au
