AUD/USD: 0.9275EUR/USD: 1.3405Friday saw some decent volatility on all fronts, care of the ebb and flow in geo-political tensions and “risk off/risk on” scenarios, and in the absence of too much economic data this week it looks as though politics will continue to dominate trade. There is nothing worthwhile today and then, tomorrow’s focus will be on the ZEW economic survey from Germany/EU. Later in the week the highlights will be Wednesday’s German CPI and the US Retail Sales while Thursday sees the EU CPI/GDP. Elsewhere, the UK gets the BOE Quarterly report/Unemployment numbers on Wednesday. Australia sees Business Confidence and Consumer Confidence (Tues/Wed) while NZ gets the Business PMI, Retail Sales, Thursday.
Having headed down to a session low of 1.3342 in early Asian trade on Friday, the US$ came under some pressure of its own once Obama announced that he had approved air strikes in Iraq if needed. Upside progress for the Euro was initially slow given the ongoing tensions in Russia, which initially capped the advance, but as these appeared to ease somewhat later in the day, the Euro shorts began to feel the heat when the squeeze spiked up to 1.3433, before settling back to finish the week at 1.3408.
It feels as though there may be more pain to come for the shorts, although it may be a quiet start to the week, with Monday having no data due for release, followed by Tuesday, where we will have only the EU/German ZEW to trade on (nothing from the US). It will therefore most likely be geo-political events that largely drive trade so keep stops tight on either side.
Technically, the 4 hour charts suggest that if 1.3420/33(200 WMA/Friday top) can be successfully overcome, then we could be in for a run up towards 1.3470 (38.2% of 1.3699/1.3332) and possibly 1.3485 (23.6% of 1.3993/1.3332/ daily Kijun / trend resistance). Beyond there would see stops triggered and could force an acceleration higher, with 1.3500, which previously acted as strong support and should now provide good resistance. A break of this would then test 1.3525 (38.2% of 1.3993/1.3332), beyond which could head up to the base of the previous wedge formation (blue line), currently at around 1.3575, although this looks unlikely to be visited, at least early in the week.
On the downside, minor support lies at 1.3380/90 (100/200 HMA) and then at 1.3360. I don’t really see it back below here over the coming session, but if wrong, look for a run back to 1.3345 (100 WMA) and then to last week’s 1.3332 low. Under there, 1.3294 (7 Nov ’13 low) would attract with more distant targets seen at 1.3228 (61.8% of 1.2754/1.3993) and then eventually at 1.3104 (6 Sept ’13 low).
In the bigger picture, as before, while the dollar uptrend remains intact, the eventual target for the Euro appears to be the 9 July low 2013 at 1.2754, albeit that it looks somewhat distant for the time being while the Euro looks to remain underpinned by short covering needs.
For today, use 1.3385/1.3430 as a guide, but watch out for political jaw-boning which may alter the “risk on/off” situation.
Economic data highlights will include:
M:
T: EU /German ZEW Economic Survey
W: German/France/Spain CPI, EU Industrial Production, US Retail Sales, Business Inventories
T: German/ France Q2 GDP, ECB Monthly Report, EU CPI, GDP, US Jobless Claims
F: EU Assumption Day Holiday, US PPI, Industrial Production, capacity Utilisation, NY Empire State Mfg Index, Rts/Michigan Consumer Confidence Index
Jim LanglandsFX Charts www.fxcharts.com.au
