AUD/USD: 0.9300EUR/USD: 1.3210After all the hype, Jackson Hole produced little new and the currencies generally chopped around without going anywhere too far from previous levels. The US$ did manage to make minor new highs against the majors, before backing off into the weekend close, although I suspect that the firm dollar trend looks set to continue in coming weeks. This week may start with some consolidation, before tomorrow's US Durable Goods and Consumer Confidence and then Thursdays US GDP provide some direction. A firm reading from each of these should help the dollar on its way, although one eye will remain on the political/military manoeuvres in the Ukraine, which would cause some jitters. Today's focus will be on the German IFO and US New Home Sales, Provisional Services/Composite PMI and Dallas Fed Mfg Activity Index. The UK August Bank holiday should mean a quiet European session.
EurUsd was choppy but rather directionless following the Jackson Hole speech from Janet Yellen on Friday, who, while noting the improving employment outlook in the US, said that she wants further evidence of the same before considering a rate hike. Then, from Mario Draghi, who without actually pulling the trigger on any changes to monetary policy in the EU, said that the ECB is ready to adjust their policy stance and to use unconventional methods of doing so, if necessary. Their words combined to produce some volatility, but the price action held well within the 1.32/1.33 range, with any further dollar gains thwarted by a market, short of Euro’s and looking to take profit ahead of the weekend, particularly in view of another escalation in the tensions in the Ukraine following the arrival of a Russian convoy from across the border.
Early in the coming week the market looks likely to focus on geo-politics once again, with Russia/Ukraine firmly in view. There is not a whole lot of economic data to drive the action this week, although the US Consumer Confidence and Durable Goods (Tues) and the US GDP (Thur) will provide some volatility and could combine to set the dollar on the next leg higher, if they meet expectations. Today will look to the German IFO and then later the US Housing data.
Technically the Euro made a new trend low, and perfectly reached the Fibo support at 1.3220 (61.8% of 1.2754/1.3993), from where we have so far seen a mild bounce to 1.3240 to finish the week. The trend low should lend some support, and given the oversold nature of the market it would not surprise me to see it hold for today.(It is a UK bank holiday so should be a quiet European session). The dailies do remain negative though and I suspect that the dollar trend to eventually continue, and on a break of 1.3200, there is not a lot of support to hold it from heading quickly towards 1.3104 (6 Sept ’13 low).
At risk of sounding like a broken record, 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. I noticed last week that Citibank are calling for an eventual run towards 1.2200 as a distant target.
Note that in Ichimoku terms, the Euro closed below the weekly cloud base(1.3300) and is now below the base of the monthly cloud (also 1.3300) and a close below here next Friday would add to the bearish view.
The topside is not going to be easily won over either, so it may be a session or two of consolidation as the charts unwind their oversold condition. Minor Fibo resistance now lies at 1.3265, above which the 100HMA/ minor descending trend /Fibo resistance (38.2% of 1.3410/1.3220) all lie at close to 1.3300 which will be difficult to conquer, especially given the Ichimoku levels mentioned above. If wrong, a further short squeeze would head towards the 200 HMA at 1.3330 and then possibly back towards the recent highs at 1.3410, although this looks doubtful.
Look for another day of trade within the 1.32/1.33 range, probably contained above 1.3220, but keep an eye on developments in the Ukraine, where any deterioration in conditions would see a run into bonds and possibly putting some pressure on the US$.
Economic data highlights will include:
M: German IFO, US New Home Sales, Provisional Services/Composite PMI, Dallas Fed Mfg Activity Index.
T: German CPI, US Durable Goods orders, Case Schiller Housing Index, Consumer Confidence
W: German Consumer Confidence
T: German Unemployment, US GDP, Pending Home sales
F: German Retail sales, EU CPI, Unemployment, US Personal Consumption/Expenditure/Income, Chicago PMI, Rts/Michigan Consumer Sentiment Index.
Jim LanglandsFX Charts www.fxcharts.com.au
