AUD/USD: 0.8875EUR/USD: 1.2845Markets were generally rangebound today although the Aud was the clear loser and looks set for yet lower levels in the days/weeks ahead and today's HSBC China manufacturing data could help it on its way, if below par. Elsewhere the US$ took a bit of a rest, which could continue to be the case ahead of the US Durable Goods/GDP at the end of the week. Before then, today's focus will be on the manufacturing PMI's, led off by China, and then followed by the Markit figures from the EU. Another weak reading from Germany, France could see the Euro come under pressure as it heads towards the medium term 1.2750 target.
It has been a rather uninspired session for the most part, with the Euro stuck in a 50 point range as it consolidates ahead of today’s manufacturing PMI’s, which could again put the pressure on the Euro should they continue the recent theme of underperformance. Not even Mario Draghi’s dovish outlook on the EU was able to cause too many waves today, although he did cause a brief dip to 1.2815. Speaking before the economic affairs committee of the EU parliament, he said that the risks to the EU are "clearly on the downside" and that recent data has given "no indication" that the sharp decline is slowing, adding that ECB is ready to use more unconventional tools to boost inflation and growth if necessary.
Technically there is little change today, after trading a 1.2867/1.2815 range, although the Euro did make a new trend low at 1.2815 after Draghi spoke, below Fridays 1.2828 close.
The overall bias remains lower, still with a break of 1.28 suggesting a run towards the target area of 1.2780 (61.8% of 1.2041/1.3995) which comes just ahead of the major rising trend support from July 2001 at 1.2760 and the 9 July 2013 low at 1.2754. The daily charts are reaching oversold levels and so the downside momentum should begin to slow here, but I don’t think it is going to turn around much and once the charts have had the time to unwind, which may take a few days, I suspect that we are in for a run towards the November 2012 low at 1.2660 and then 1.2500 (76.4%of 1.2041/1.3995). Below here we then look likely to ratchet our way lower towards the 22 July low at 1.2041.
If we do see another squeeze to the topside, which the shorter term charts suggest is possible, the initial resistance is at the session high at 1.2867 and then at the 100 HMA, currently at 1.2890. It would appear though that the Euro is going to struggle to make it back to 1.2900 today and the 200 HMA at 1.2910 will provide added resistance. If we do see a larger short squeeze, then look for further sellers to emerge at the descending trend resistance at 1.2925 but it will need some strong PMI’s from the EU to see the Euro squeeze back above here and on towards 1.3000. I cannot see it happening, and right now would again use a squeeze towards 1.2900/25, should we see one, to sell into.
Economic data highlights will include:
EU Flash Mfg PMI’s, US Flash Mfg PMI, Richmond Fed Mfg Index.
Jim LanglandsFX Charts www.fxchartsdaily.com
