AUD/USD: 0.9025EUR/USD: 1.2940It was a choppy, but for the most part, uninspiring session as the market turns its focus towards the FOMC, due on Wednesday (early Thursday-Asia). The OECD lowered the 2014/15 global growth outlook, highlighting the issues in the EU, but the dollar was unable to take advantage after the softer than expected US data release, where both I./P and C/U missed expectations. The EU/German/ZEW, UK CPI, and then later the US PPI will be the main focus today. Australia gets the RBA Minutes, but the market will mostly sit on its hands, I suspect, until Wednesday afternoon
The Euro remained within a range today, above 1.2900, but with the upside capped once Europe walked in and the OECD lowered their 2014/15 global growth forecast, warning that the EU is once again the biggest issue and urged aggressive action from ECB, by launching GE.
The dollar was unable to take too much advantage (US GDP Outlook was also lowered from 2.6% to 2.1%) after the US data where both the Industrial Production and Capacity Utilisation missed expectations.
Things now look to be largely on hold until tomorrows FOMC tomorrow, where the market has set itself up for a more hawkish tone from the Fed. The danger is that they remain cautious than the market is expecting, which could see quite a nasty reaction in the dollar although the Euro is going to find the upside difficult, with plenty of interested sellers into any rallies, and with the ECB looking likely to act at any time to add further liquidity with a QE programme of their own.
On the topside, the reverse head/shoulder that we spoke about yesterday appears to have evaporated, and the Euro has remained capped all day by the 200 HMA, now at 1.2955. A break above there would head back to Friday’s 1.2978 top, above which, would see a run towards 1.3000, and potentially to the Fibo resistance at 1.3055 (23.6% of 1.3700/1.2858). If the Fed fails to live up to expectations, the Euro could build a head of steam and head back to the level from where it broke lower at 1.3100/05 and then to the next Fibo level(38.2%)/descending trend resistance (pink line) at 1.3175.
The downside remains in much the same situation. A break back below 1.2900 would be needed to head back towards the trend low at 1.2858 below which there is not a lot to stop it heading to 1.2800 and then to the target area of 1.2780 (major rising trend support; from July 2001), which comes just ahead of the 9 July 2013 low at 1.2754.
For today, the ZEW will provide the main interest but the market will be largely sitting on its hands, so another day of choppy trade above 1.2900 seems the most likely outcome.
Economic data highlights will include:
EU Q2 Labor Costs, German/EU ZEW Survey Economic Sentiment, US PPI.
Jim LanglandsFX Charts www.fxchartsdaily.com
