The dollar has risen strongly against the European majors after some soft EU Services data, ahead of today’s ECB and BOE meetings. The ECB will be the main focus, where plans for the upcoming QE programme are expected to be revealed, along with the revised EU inflation and growth outlooks, and look likely to keep the Euro under pressure. Elsewhere, the Aud and Kiwi have been remarkably resilient in the face of the US$ strength and will take direction today from the Australian Retail Sales and Trade Balance. There is also some secondary data due later on; German Factory Orders, US Jobless Claims and Factory Orders, beyond which, the focus will begin to turn towards tomorrow’s US jobs/NFP data.
EUR/USD: 1.1073
The Euro fell to an 11-1/2 year low ahead of today’s ECB meeting, where policy makers are expected to provide further details on the bond purchase stimulus plan, as well as providing updated inflation and growth forecasts .
Several reasons were put forward for the fall in the Euro, but the session got off to a poor start when the EU Services PMI’s came in below expectations and the Euro has remained heavy ever since. A Chinese ratings agency downgraded France from A+ to A which did not help matters, nor did a story of financial concerns in the Austrian province of Carinthia. Later in the day the US ISM non-manufacturing beat expectations and underpinned the dollar ahead of Friday’s jobs report while the ADP jobs numbers came in marginally below expectations (212K vs exp 220K), but had little lasting effect.
The Euro is now sitting at the Feb 1994 (1.1070) low which could act as minor support, but now that we are below 1.1100, there is little technical support to hold the Euro up ahead of the Sept 2003 low at 1.0759 and with the ECB and the US Jobs report coming up, we could be in for quite a wild ride over the next few days.
On the topside, 1.1100 will be the initial resistance, beyond which there is Fibo resistance at 1.1135 (23.6% of 1.1379/1.1060) and then 1.1180 (38.2%) where the 100 HMA also lies. Above here would see a return towards 1.1200 and possibly 1.1255 (61.8%/200 HMA) although given that the ECB will most likely be revealing further details of their QE programme it is difficult to see too much upside for the Euro and I would still prefer to play it from the downside.
Sell rallies still seems to be the plan. Parity is coming. So is 0.8000, but that is a long way off!
Economic data highlights will include:
ECB IR Decision/Press Conference, German Factory Orders, US Jobless Claims, Factory Orders.
Meta Trader – AxiTrader EUR/USD: 4 Hour
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USD/JPY: 119.72
There is really nothing new to add today after a 119.46/119.82 choppy session, well within the parameters of the large medium term triangle and we should probably expect much the same today as the market gathers its breath for the fireworks that lie ahead, after the NFP figures have been released on Friday.
The charts remain mixed and another day of 119.00/120.00 would not really surprise, but the 4 hour charts are still showing a slightly negative bias which may help cap the upside.
If the dollar does head lower, the first support will be close by, at the last two session lows at 119.46 and at 119.38 and backed up by further bids at the 200 HMA at 119.30 and the daily Tenkan (119.27) so this area should be pretty strong support should we see the dollar down here. A break would then head to 119.00 which again should be quite strong support. I doubt that we head too much below here today as we await Friday’s US jobs data, but if wrong, further bids would arrive at last Thursday’s low at 118.62 low, where the daily Kijun and the base of the rising channel will again prop the dollar up. Below that lies the minor Fibo support at 118.40 (61.8% of 117.17/120.46), beneath which would head back to the recent 118.23 low and to the daily cloud top, now at 118.05. Below 118.00 would then head back into the previous 117/118 consolidation area and could even see the chance of a move towards the 116.40 area, although right now this looks over the horizon.
On the topside, 120.00 will again see good sellers ahead of the previous session high and strong resistance, at 120.25. Although doubtful today, a break to the topside would take the dollar on towards the 12 Feb high at 120.46, beyond which, it would then head onto, and probably beyond, 121.00. If/when we do see such a move, look for further advances towards the trend high at 121.85 (8 Dec), above which would see a run towards the 15 July 2007 high at 122.42. In the longer term, the target of 124.13 (17 June 2007 high) would appear on the horizon but will take time given the resistance levels sitting in between.
Meta Trader – AxiTrader USD/JPY: 4 Hour
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GBP/USD: 1.5258
Cable has been dragged lower by the softer than expected UK Services PMI today, and not helped by the weaker Euro which has dragged it down, although the cross has also headed lower to a new trend low at 0.7235.
Today sees the BOE meeting although no change is expected and the real focus will be on the ECB who are expected to reveal further details of their QE programme, which is likely to further weigh on the Euro and will probably also send the cross lower, which should help to underpin Cable to a degree.
Technically, Cable has broken several support levels and now appears to be headed towards the next Fibo level at 1.5203 (61.8% of 1.4986/1.5551), which should be strong support (daily cloud base), but a break of which could then see further losses towards 1.5165 (25 Feb low), 1.5131 (24 Feb low) and at 1.5120 (76.4%). Below here lies the 2 month rising trend support at 1.5080, but which I suspect will be a few sessions away yet.
On the topside, minor resistance will be seen at 1.5280 and at 1.5300, although the first Fibo resistances are not seen until 1.5320 (23.6% of 1.5155/1.5251) and 1.5365 (38.2%).
Economic data highlights will include:
BOE Interest Rate Decision, APP Facility.
Meta Trader – AxiTrader GBP/USD: 4 Hour
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USD/CHF: 0.9632
The dollar has again headed higher today, in reaching 0.9681, as it continues to move further away from the 100 DMA and the Fibo level at around 0.9540, which would act as strong support, if seen.
Direction today will come from the ECB meeting, and I would therefore tend to leave this pair alone and concentrate on the EurUsd.
Further gains towards 0.9700/50 now look possible, while the initial support is seen at 0.9600. Below the more important support at 0.9540, the downside looks underpinned in the 0.9450/0.9500 area, although I don’t think we see it there today.
Meta Trader – AxiTrader USD/CHF: 4 Hour
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AUD/USD: 0.7819
The Aud has remained remarkably solid following Tuesday’s RBA meeting, particularly in view of yesterday’s below-trend local GDP report and the strength of the US$ against the other majors today, even reaching 0.7860, but beyond which proved too much as sellers lined up ahead of 0.7880. The Aud has since taken a quick dip back to 0.7803 on the back of a report in the Australian newspaper that Rio may cut 1000 jobs as part of its cost cutting programme, but still holds above 0.7800 at the time of writing.
The thrills never cease in the Aud, and today is the turn of the Retail Sales and the Trade Balance to provide the entertainment. The RS are expected to show some improvement to +0.4% for January, while the Trade Deficit is expected to widen from $0.436 million in December to $0.950 million in January.
Technically there is little change and the charts are currently giving little hint in either direction.
If today’s RS data is better than expected, then 0.7850/60 may again come under pressure, although given the strength of the US$ elsewhere – with possibly more to come on the back of a lower Euro after the ECB meeting, – it is difficult to see the Aud making further upside progress with any ease.. If wrong, a topside break would then head on towards 0.7880 and possibly even towards 0.7900, but if seen I would be a seller, with a SL placed above last week’s 0.7912 high, which comes in roughly in line with the sideways channel that appears to be forming, as per the chart. Note also that the Aud is also approaching the top of the major descending channel, at approximately the same 0.7900 level. If we do break above here, and take out the 0.7915/22 level (0.7922: 23.6% of 0.8910/0.7625) then the Aud could potentially head a fair bit higher, so will be worth keeping an eye on.
On the downside, if RS/TD readings are soft, then 0.7800 will again come under pressure, beyond which, the Aud could then head back to 0.7770 and possibly to the strong support at 0.7750/40. I would be doubtful of heading below here for a while now, but if wrong, 0.7720/25 will be the next support ahead of 0.7700. A break of this level would then head towards the channel support at 0.7680 and on to the 12 Feb low of 0.7643 and the trend low at 0.7625. Eventually I suspect we will reach the RBA’s stated target of 0.7500, and from a technical point of view we could head a lot lower, although that would be a long term move.
Economic data highlights will include:
Retail Sales, Trade Balance.
Meta Trader – AxiTrader AUD/USD: 4 Hour
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NZD/USD: 0.7591
The Kiwi headed higher, to reach 0.7608 after the release of the slightly softer US ADP jobs data and still remains relatively firm, sitting at 0.7585. The AudNzd cross finally broke down through 1.0300, reaching a low of 1.0296, – with parity at some stage looking more or less inevitable, particularly as we head towards the next RBA meeting where a cut could well be on the cards.
Today’s direction will come via the Australian data, and if strong, the topside could see another run towards 0.7600, beyond which would head to last week’s 0.7613 high where the Fibo resistance at 0.7616 (61.8% of 0.7175/0.7890) should again prove a tough nut to crack. If so, I would still prefer to sell into the strength, but a break of the 0.7620/25 area would trigger stops and could then see a run towards the top of the rising wedge formation at around 0.7685, where I would again be tempted to sell the Kiwi.
On the downside, the nearby support lies at 0.7570 (minor) and then at the 100/200 HMA’s at 0.7545 and at 0.7535, below which, 0.7525 should prove pretty solid, if we see it down there, this being where the rising trend support now lies. A break of 0.7500 would head towards minor support at around 0.7470 and then to the Fibo support at 0.7445 (38.2% of 0.7175/0.7610) although this looks some way off. A break of this though would then head towards the next target the 13 Feb low at 0.7410 and then 0.7400.
Depending on the data, selling rallies remains the favoured plan. It may be that we need to take out the stops above 0.7625, although I am not sure that this is likely. Below 0.7500 could be the start of a bigger move lower.
Wait for the data and take the cue from there.
Meta Trader – AxiTrader NZD/USD: 4 Hour
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