AUD/USD: 0.9370EUR/USD: 1.3565It was a choppy session, with both the EU ZEW and the US retail sales missing expectations, but the focus, was on Janet Yellen's testimony. Her early assertion that an easy monetary policy is still necessary sent the dollar lower, only for it to turn sharply higher in the Q&A when she suggested that if the improvement in the jobs data accelerates, policy could be then tightened quite quickly. Today's highlights will be in Asia with release of the China Q2 GDP, Retail Sales and Industrial Production. Before then we get the NZ Q2 CPI. Later on the UK Jobs data and then US PPI, Industrial Production will come into focus.
It was a choppy session today, with the Euro sliding lower after the ZEW economic survey missed expectations and with Portuguese banking concerns once again coming to the fore. Having fallen to 1.3585, the Euro then rebounded to 1.3620 once the US Retail Sales came in below par and sat close to 1.3600 ahead of Janet Yellen's testimony.
Her prepared text indicated that further accommodative policy is still appropriate and sent the dollar a little lower although the Q&A session had a bit of a hawkish tilt to it as she indicated that if the improvement in the jobs data accelerates, policy could be then tightened quite quickly. This sent the dollar higher again, with the Euro reaching a session low of 1.3562 and with little bounce seen since then.
Technically, the Euro has now taken out the previous base at 1.3575, and with the 4 hour momentum indicators pointing lower it would appear that more downside could lie ahead. The next support will be seen at the minor rising trend support at around 1.3540 a break of which would head to the Fibo support at 1.3520 (38.2% of 1.2754/1.3995) - which coincides with the base of the rising wedge (blue line), now at around 1.3515. Below here would see good bids ahead of the post-ECB spike low at 1.3502, and 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 1.3500 would hint at an acceleration for a 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, 1.3575/85 will now see the immediate sellers ahead of 1.3600 and 1.3620. I don’t really see it back above 1.3600 today, but if wrong and the Euro does head higher, offers in the 1.3640/50 area remain solid, where the minor Fibo resistance at 1.3646 (61.8% of 1.3700/1.3562) would provide strong resistance. A break of this level would see the Euro head on to 1.3665 (76.4%/ daily cloud base/200 DMA) but now looks a long way off. 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%).
The secondary US data will provide direction today, but I would expect 1.3640/85 to pretty much cover it.
Economic data highlights will include:
EU Trade Balance, US PPI, Industrial production, Capacity Utilisation
Jim LanglandsFX Charts www.fxcharts.com.au
