US$ stages another recovery. A soft ZEW and doveish ECB would keep the pressure on the Euro.

The US$ has staged a recovery today after some early Asian selling, and most of the majors sit near their session lows. We seem to be in a period of  general consolidation, which looks as though it could continue for the next few sessions although further doveish comments from various ECB members such as we saw today, will have the Euro under pressure once again. Today’s direction will be guided by the ZEW Economic Survey and then later by the US PPI, while the UK will get the CPI, PPI,RPI. The Aud$ may see some decent action, where the RBA Minutes are due and Glen Stevens will also be speaking.

EUR/USD: 1.2452

After having squeezed up to a high of 1.2576, the Euro is lower again after some dovish comments from various ECB board members, including Draghi, and currently sits close to session lows after the dollar staged a general rebound following Friday’s selloff. It now looks as though the general theme of consolidation is going to continue, with some potential for further downside momentum if today’s ZEW survey result comes in weaker than expected.

Currently sitting right on the 200 HMA at 1.5455, further losses, – below the session low of 1.2444- would take us back to 1.2400 and then to the trend low of 1.2357 although I don’t really see this being tested today. Further out, we would then test 1.2342 (21 Aug 2012 low) and 1.2295 (20 Aug 2012 low), which both lie ahead of the 200 Month Moving average at 1.2205 and the long term support off the Nov 2005/June 2010 lows at 1.2100. Then comes the major target at 1.2041 (July 2012 low), but which looks unlikely to come about for a while.

Rallies will see sellers at 1.2470 (100 HMA) ahead of 1.2500. Above here would see the chance of a run back to the session high at 1.2576, where we now have a double top with the 4 Nov high. I doubt that this will be seen today, but if incorrect, then look for a run towards 1.2600, where the descending trend resistance now lies. A break of this would trigger stops and could see an acceleration towards 1.2682 (38.2% of 1.2886/1.2357).

Look for more choppy trade today, with a mild downside bias, with direction to be governed by the ZEW Economic Survey and then later by the US PPI. Use 1.2385/1.2475 as a rough guide.

Economic data highlights will include:

German/EU ZEW Survey, US PPI, NAHB Housing Market Index.

Meta Trader – AxiTrader   EUR/USD: 4 Hour

USD/JPY: 116.42

Yesterday’s ghastly GDP figure (-1.6% y/y v exp +2.1%), which took Japan back into recession, caused some wild swings, with the dollar reaching 117.04 before collapsing to  the session low of 115.44, since when it has spent the day slowly recovering, currently sitting towards the higher end of the range.

Nothing really has changed from a medium term technical point of view, and while the longer term trend looks set to point higher, the daily charts are becoming very overstretched so I would be a bit doubtful of making any major gains above 117.00 in the session to come. If wrong there is not too much to stop the dollar heading towards 117.50 and then to 117.93 (14 Oct 2007 high) –  and in the longer term, the target of 124.13 (June 2007 high) remains valid but will take time.

A return to levels back below 116.00 would find bids at 115.85(100 HMA) and then at the session low of 115.44 which lies just ahead of the 200 HMA at 115.35. A break of this would see a return to the daily Tenkan at 115.00. Under here looks unlikely in the near term, but as I said, the daily indicators are overbought and look to be preparing to roll over so, if long, some caution is warranted.

.A day of 116/117 may be in order.Meta Trader – AxiTrader   USD/JPY: 4 Hour

GBP/USD: 1.5640

After reaching up to 1.5737 amidst some early cutting of long dollar positions, Sterling then turned to head sharply lower in reaching a session low of 1.5619. The slide was on the back of some broad based buying of dollars but Cable was not helped by further dovish comments on inflation from a couple of BOE board members and it was further undermined by the fact that HSBC put out a comment that it now does not think there will be any rate hike until Q1 2016.

I suspect we are in for some more choppy consolidation above the recent trend low of 1.5593 today, which would allow further unwinding of the oversold condition of the 4 hour charts. If Cable does come under further pressure though, – which may well happen if the CPI comes in below expectations (exp 1.3%yy; Core,1.6%), – look for a run, below 1.5590 towards 1.5550 and then to 1.5500. There really is not too much support to be seen though until we approach 1.5400, which may come about if the BOE Minutes, due tomorrow, are overly dovish.

A return to the topside would see sellers at 1.5660 (minor) ahead of 1.5700. Above here would see a run back to the session high and possibly to 1.5750 (100 HMA). I don’t really see it up here today, but if wrong look for further gains towards 1.5800 and then to the 200 HMA at 1.5815.

Economic data highlights will include:

UK CPI, PPI, RPI.

Meta Trader – AxiTrader   GBP/USD: 4 Hour

USD/CHF: 0.9647

The dollar recovered from early losses to 0.9550 to currently sit just below the session high of 0.9654, where the 200 HMA has so far capped it. Further gains would see a run back to 0.9700, a break of which could see a run towards Friday’s 0.9741 peak. Beyond there would target 0.9789 (29 May high) and 0.9838 (22 may high).

On the downside, the immediate supports are at 0.9600 and then at the session low at 0.9550 (daily Kijun), below which would head to 0.9535 (23.6% of 0.8855/0.9741 & daily cloud top). Under here would then take a look at the larger degree of Fibo support at 0.9495(23.6% of 0.9360/0.9471) and eventually would hint at 0.9441 (29 Oct low)..

Meta Trader – AxiTraderUSD/CHF: 4 Hour

AUD/USD: 0.8712

After reaching a high of 0.8795 in Asia, the Aud has slipped steadily lower and is currently back below the 100 HMA (0.8715).

The RBA minutes and Governor Stevens’ speech will be the main points of focus today. The minutes are likely to reiterate the mantra of steady-as-she-goes on rates and will probably, once again, lament the level of the currency. Stevens may have more effect when he speaks, particularly following last week’s comments by the RBA’s Asst. Gov. Kent who noted that intervention hasn’t been ruled out. If Stevens repeats that view, then the Aud could well head sharply lower.

In the meantime, we are back at close to 0.8700. The 1 and 4 hour charts look rather negative and a break of the 0.8695 session low would see the Aud head back towards Friday’s spike low at 0.8648. There should be some decent buyers down there, although a break would head towards 0.8600 and to the recent low at 0.8590, below which would see a run towards 0.8570 and then possibly to last week’s low at 0.8540.  As we said before, this will provide very strong support, being both 50% of the move from 0.6006/1.1082 and also the base of the monthly cloud. A break of this level though, and a November close below it, would have very bearish implications, for a test of the major channel base at around 0.8474 and then the May 2010 lows at 0.8066.

On the topside, we may see a run back towards 0.8750, although right now this appears unlikely. If wrong then look for a return towards the session high of 0.8795. Above 0.8800 could then head on towards 0.8865 (38.2%0.9398/0.8540) although if we do see it up there, we should be looking for levels to sell it as I suspect that the larger downtrend will eventually resume albeit it looks as though it could take a while.

Look for more choppy consolidation today, but with a mild downside bias. Use 0.8730/0.8670 as a guide.

Economic data highlights will include:

RBA Minutes, RBA Stevens Speech, CB Leading Indicator.

Meta Trader – AxiTrader   AUD/USD: 4 Hour

NZD/USD: 0.7916

The Kiwi got a boost from the solid retail sales yesterday, to reach as session high of 0.7974, but it has been steadily downhill since then in declining to 0.7900, before some consolidation above there and below the daily cloud (0.7940), in the NY session.

There is not too much due today so the Kiwi may well follow the Aud around but the shorter term charts suggest that it may be the downside that comes under some pressure. Below 0.7900 would see a run towards 0.7880 (100 HMA) and then to 0.7850 (38.2% of 0.7660/0.7974), and to 0.7800.

If/when the down trend resumes in earnest and the  Kiwi does turn lower, then below 0.7800, look for a bids at 0.7780 (61.8%  of 0.7660/0.7974) and eventually a run to 0.7700.  A break below 0.7700 (50% of 0.6560/0.8838) would see a retest of the trend low at 0.7660. Under this, there are minor support at 0.7625 and at 0.7600, but not an awful lot to prop it up ahead of 0.7530 (100 Month MA) and then 0.7435 (61.8% of 0.6560/0.8838).

On the topside 0.7940 and then 0.7975 will again be the points to watch. Above here would see sellers at 29 October at 0.7977 and at 0.7990 (22 Oct) ahead of 0.8000 and 0.8010 (21 Oct) which will see strong sellers, although I don’t think we are going close today.

Meta Trader – AxiTrader   NZD/USD: 4 Hour