AUD/USD: 0.9305EUR/USD: 1.3365The US$ gave up some ground after the soft US Retail Sales but later recovered some of the lost ground as the market turns its focus towards today’s EU HICP/ GDP release. A below par figure would see the Euro test the recent lows and potentially head sharply lower. Cable was sharply lower after a dovish BOE QIR report. Aside from the EU data the other main interest today will come from NZ, where the Business PMI and the Retail Sales are due shortly.
The German/French inflation data came in pretty much inline with expectations today and after an early dip to 1.3342, the Euro later headed up to as high as 1.3415 after the US retail sales missed expectations, by coming in flat as opposed to the expected rise of 0.2%. The Euro’s gains were not sustained and it fell back later in the day as the dollar regained its ground, to close the NY session back at 1.3365.
Focus now turns to today’s EU HICP final and GDP reports. Should these come in below expectations the Euro is likely to make a serious attempt at taking the recent lows at around 1.3335 and could prompt the ECB to act further to promote economic growth.
Technically, as discussed yesterday, the brief rally did allow us to sell the Euro, without being stopped out above 1.3440. Stops should now be lowered to 1.3400 on those positions. Otherwise the technical levels remain pretty much unchanged. The short term triple bottom at around 1.3335 remains intact and this needs to give way before the Euro can head down towards 1.3294 (7 Nov ’13 low) below which, more distant targets are seen at 1.3228 (61.8% of 1.2754/1.3993) and then eventually at 1.3104 (6 Sept ’13 low).
A break back above 1.3400 and then above the day’s high of 1.3415 would see an acceleration back towards last Friday’s spike high at 1.3433,. Above there, which looks a bit unlikely unless today’s EU data surprises to the upside, we could then 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). Above this would see more stops triggered and could force an acceleration higher towards 1.3500, which previously acted as strong support and should now provide good resistance. A break of 1.3500 would 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.
Today’s plan remains pretty much unchanged.Continue to hold a core short position but leave room to sell into strength with a SL above 1.3440, but looking for a run below 1.3335 towards 1.3300 and eventually a fair bit lower.
Economic data highlights will include:
German/ France Q2 GDP, ECB Monthly Report, EU CPI, GDP, US Jobless Claims
Jim LanglandsFX Charts www.fxcharts.com.au
