AUD/USD: 0.9355EUR/USD: 1.3180Soft EU data and the return of Russia/Ukraine headlines dominated European trade ahead of the US GDP, which came in firmer than expected and has helped to underpin the dollar in choppy but generally rangebound trade. WTI headed higher on geo-political worries and oversold conditions, as did Gold, although it eventually gave up its gains and returned to the range. Today's focus will be on the EU CPI reading and on the possibilities of what Mario Draghi may announce at next Thursday's ECB Meeting. Ahead of that, it is a big day of Japanese data, also featuring the CPI, which could cause some ripples for the Yen. Otherwise, being month end - and a long weekend in the US (Labor Day), - it looks like being a day of book/position squaring. Have a good weekend.
Generally soft EU data and the stronger US figures, where the Q2 GDP was revised up to 4.2%, from the initial estimate of 4.0%, beating expectation of 3.9% has once again underpinned the dollar today.
A soft reading from the EU CPI (exp 0.3%YY, Core 0.8%YY) later today will place further pressure on the downside, as thoughts turn to next week’s ECB meeting and the increasing prospect of Mario Draghi indicating some sort of easing in attempting to spark some sign of life into the EU economy.
Technically, the Euro did make an attempt to fill the Monday opening gap to 1.3235 , reaching 1.3220 today, but then came unstuck when headlines began to emerge of increased tensions between Ukraine & Russia, and it quickly dived towards 1.3170 and later saw a low of 1.3159 after the US data release.
All up, the recent range is pretty much intact, with the 1.3150 option barrier still untouched although a low CPI reading would send the Euro lower, giving it a good workout. The next target to watch, below 1.3150, would be 1.3104 (6 Sept ’13 low), a break of which would head towards the Fibo level (76.4% of 1.2754/ 1.3993) at 1.3045, which if/when seen should prove strong support. The 4 hour charts are still unwinding their O/S condition and for the time being if we do head lower, I would imagine that ahead of the weekend, then 1.3100 or thereabouts should hold it.
If on the other hand, the CPI improves, which looks doubtful, given yesterday's individual readings (Germany; 0.00%) then the Euro will squeeze back above 1.3200 and possibly to the session high of 1.3220. Beyond this would hint at a return to 1.3235/40 which would close the week's opening gap lower, and is where the minor descending trend resistance currently lies. Above here would head towards 1.3270 and then possibly to 1.3300/15 where strong resistance is seen, this being the base of both the monthly (1.3300) and weekly cloud (1.3315).
Wait for the EU data, which will then be followed by a round of secondary US data, but overall a choppy day, confined within 1.31/1.32 would not surprise. It is month-end and a long weekend in the US so position squaring will most likely be the name of the game.
Economic data highlights will include:
EU CPI, Unemployment, Core Personal Consumption/Expenditure Index, Personal Income/Spending, Rts/Michigan Consumer Sentiment Index
Jim LanglandsFX Charts www.fxcharts.com.au
