AUD/USD: 0.9365EUR/USD: 1.2950GBP/USD: 1.6180Sterling has opened much lower following a weekend poll indicating that the pro-independence movement now has 51% of the vote. Friday's NFP was way below expectations of +230 K, at 142K, but the Euro was unable to take advantage and despite a brief rally, remains near trend lows. In the absence of any major data some consolidation appears to be in order for the first half of the week. It maybe Thursday's German CPI or Friday's US Retail Sales before we see any real action. Today sees EU Sentix Investor Confidence while Asia gets Japan's GDP and Australia the ANZ Job Ads. China Trade Balance too.
The NFP failed to deliver on Friday, rising by only 142K and not even coming close to the expected 220+, causing an immediate selloff in the dollar and, for the time being at least, putting the strong uptrend on hold.
The Euro though only made it to as high as 1.2987, not even testing the sellers lined up at 1.3000 before sinking back to finish the week at 1.2950, with the medium term dollar uptrend still intact.
The coming week is fairly light on economic data for both the US and EU, so consolidation may dominate the next session or two, perhaps until the August CPI figures for several EU nations, including Germany, and possibly until the US Retail Sales figures on Friday.
The picture therefore looks as though it will be choppy but quite possibly contained within 1.2900/1.3000 for the next few days, and given the extreme oversold nature of the 4 hour charts, if there is a bias, it is probably to the topside in order to allow them to unwind.
Should we get there, 1.2990/00 will be difficult to overcome, but should the Euro find the strength to do so, sellers will arrive at minor Fibo levels at 1.3040 and 1.3070 (daily Tenkan). I don’t really see it getting close to this, but over the next few days we could see a short squeeze, and if we do break above 1.3070 then further sellers would arrive at 1.3100.
On the downside, the initial support is at the trend low at 1.2920 and below this lies the important Fibo extension at the 161.8% projection of 1.3993 to 1.3502, from 1.3700 at 1.2906. I would be surprised to see a concerted test of 1.2900 in the next day or two, but if wrong, a break lower would then hint at a run towards the major rising trend support at around 1.2780 (monthly chart, from July 2001 – see below), which comes just ahead of the 9 July 2013 low at 1.2754.
A break of this would be significant an suggest a run to the 200 Month MA at around 1.2200.Look for 1.2930/1.2985 to cover it today.
Economic data highlights will include:
M: German Trade Balance, Sentix Investor Confidence Survey
T: German CPI, ECB Monthly Report, US Jobless Claims, Monthly Budget Statement
F: EU Employment Change, Industrial Production, US Retail Sales, Business Inventories, Rts/Michigan Consumer Sentiment Index
Jim LanglandsFX Charts www.fxchartsdaily.com
