AUD/USD: 0.9298EUR/USD: 1.3190After the opening gap lower for most of the majors against the dollar - particularly the Euro and the Yen, following on from Jackson Hole, the currency markets have had a reasonably steady session, with the dollar hanging on to most of its gains. There is little data out in the first half of today so we could be in for more of the same, and it will be the US Durable Goods and Consumer Confidence that will be the market's focus. Overall the medium term positive trend for the dollar looks set to continue but in the short term it is becoming overbought and a bit of a correction, allowing the shorter term charts to unwind, would do no harm.
The German IFO came in a little lower than expectations on Monday, but given that the Euro had already opened with a 50 point gap below Friday's close it had little immediate effect on the price action, with the Euro hanging around the session lows at around 1.3190. The IFO economist added that while German domestic consumption remains solid, he expects Q3 German GDP to be close to zero, which is likely to reduce 2014 German GDP forecast toward 1.5% from 2.0%. Not a positive for the Euro.
Since then, the EurUsd has done very little and still trades close by as we now await today’s release of the US Durable Goods Orders and the Consumer Confidence. The DG’s do have a wide variance of expectations (exp +8%) so beware, it could produce some short term volatility.
Technically, the dailies still point lower, although the 4 hour charts are at oversold extremes and some sort of correction would be healthy before the medium term trend towards 1.3000 can continue. The gap to Friday's closing price still needs to be filled, so a squeeze back to the 1.3240 level would not really surprise although beyond there could be tricky, with further resistance seen at around 1.3260 (100 HMA) and at the descending trend resistance currently at 1.3280. I cannot see it really getting close to these levels today unless the DG’s are well under expectations and push the dollar lower, but if wrong, we could see a squeeze back towards 1.3300/15 where strong resistance is seen, this being the base of both the monthly (1.3300) and weekly cloud (1.3315).
Below the session low of 1.3183, support for the Euro is seen close by at the base of the descending channel, now at 1.3175. US bond yields have recovered from their lows helping to keep the bid tone under the dollar today, and should this continue, on the back of strong US data later on, the dollar will break through the base of the channel putting the Euro under further pressure. There is some support for the Euro at the 9 Sept 2013 low at 1.3164, below which there is not much to hold it from heading quickly towards 1.3104 (6 Sept ’13 low). Below that, the next target is found at the Fibo support (76.4% of 1.2754/ 1.3993) at 1.3045, which when seen should prove strong.
For the coming session it should be fairly tight until the US get going, but given the oversold nature of the 4 hour charts a bit of a bounce would not surprise, which would then provide another sell opportunity. Patience is required but look for 1.3175/1.4240 to cover it, bearing in mind that the chart gap does still need to be filled.
Economic data highlights will include:
US Durable Goods orders, Case Schiller Housing Index, Consumer Confidence
Jim LanglandsFX Charts www.fxcharts.com.au
