Euro lower after ECB. Market focus now on EU GDP, US Jobs/NFP data

Mario Draghi announcing that EU QE will commence next week, with inflation likely to stay very low, possibly negative, was enough to send the Euro lower today and elicited another session of general US$ strength. Today’s main action will come initially via the EU Q4 GDP, which will be followed by the US Jobs/NFP (exp 5.6%/240K). Elsewhere, Australia gets the Construction PMI and the UK, the CPI expectations. Have a good w/e.

EUR/USD: 1.1029

After leaving rates unchanged today (as expected), the Euro headed lower once Mario Draghi had said that the ECB would begin its QE programme by buying sovereign debt next week and would continue to do so until inflation was on course for the target, just below 2%. He added that in the meantime inflation will remain very low, possibly negative in the near term and that bond yields could fall to the ECB’s deposit rate, at -0.2%.The ECB also released its projections for inflation which is estimated to be flat in 2015, down from previous forecast of 0.7%, and then rising to 1.5%, (revised up from prior 1.3%) in 2016, reflecting an expected rebound in oil (really?!). Also released, GDP growth is projected to be 1.5% in 2015, 1.9% in 2016 and 2.1% in 2017.

Nearer home, today will be a busy session with the EU GDP (exp 0.3%qq, 0.9% yy) and then the US Jobs/NFP (exp 5.6%, 240K). .

The Euro was originally lifted to a high of 1.1113 today after the upgraded projections but then reversed sharply once Draghi announced the commencement of the QE programme, and has so far seen a low of 1.0986. Direction will depend on the numbers, but the downside still looks to be the direction that we are heading in, with 1.0900 and then 1.0800 the next real targets, although as we said yesterday there is not an awful lot to hold the Euro up ahead of the Sept 2003 low at 1.0759.

On the topside, minor resistance will be seen at 1.1050/60 ahead of 1.1100 and the spike session high at 1.1113. Beyond there, the 200 HMA and the first key Fibo resistance is at 1.1135 (38.2% of 1.1378/1.0986), but which seems a long way off unless the NFP comes in way below expectations.

Overall staying short of Euro while leaving room to and add to the position into strength still seems the way to go.

Note that the DXY (chart below) has at last taken out the important resistance at 95.50 and at 95.85, currently sitting at 96.36 and  there is little to stop the index heading on towards 98.90, which is the 61.8% extension of the rally from 87.62 to 95.48 from 94.05,  and then on to the August 2003 high at 99.49.

The recent cold weather in the US could cause a bit of a dip in the NFP number, but as long as it is not too far below expectations, I suspect the dollar uptrend is about to see an acceleration higher.

Economic data highlights will include:

EU GDP, US Unemployment/NFP, Consumer Credit.

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DXY Weekly

USD/JPY: 120.10

The dollar is generally higher today, despite some soft US data, after the ECB announcement,  with US$Jpy taking out the 120.00 resistance,so far reaching 120.38, before retreating a little towards the end of NY trade.

A quiet session is now likely ahead of the US data, with the upside limited ahead of the 12 Feb high at 120.46, beyond which, it would then head onto, and probably beyond, 121.00. If we get a strong NFP, 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.

On the downside, back below 120.00 will find bids at 119.60 and again at around 119.40. I would be a bit doubtful of heading below here unless the NFP is very poor, but if wrong then a decline to 119.00 could be seen, below which 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.

Economic data highlights will include:

Leading Index, Coincident Index.

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GBP/USD: 1.5237

The BOE left rates unchanged, and so is Cable today, after having seen a range of 1.5214/69. Only a brief statement was released by the BOE and focus will now turn to the meeting minutes, to be published on March 18. Ahead of that, today will take its direction from the UK Consumer Inflation Expectations and the US Jobs data.

Technically there is little change today, and below the session low at 1.5214 will find bids at the next Fibo level at 1.5203 (61.8% of 1.4986/1.5551), which should be strong support (daily cloud base). A break of this 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, resistance will be seen at 1.5270 (daily Kijun), 1.5295 (23.6% of 1.5155/1.5214) and at 1.5340 (38.2%).

The charts are mixed but the dailies are pointing lower so I suspect a stronger test of 1.5200 and lower may lie ahead and selling into strength remains favoured.

Economic data highlights will include:

Consumer Inflation Expectations.

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USD/CHF: 0.9737

The dollar has again driven higher today, in reaching 0.9748 and looking headed towards the Fibo resistance at 0.9785 (76.4% of 1.0238/0.8322). Direction will now come from the NFP and a good number could well see this level taken out with 0.9800, and higher, looking to be on the cards.

The initial support is seen at 0.9700 below which, the rising trend support is now at 0.9620.

Economic data highlights will include:

Unemployment, CPI.

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AUD/USD: 0.7775

The Aud finally gave up its attempts to take out 0.7850/60 and has reversed and headed lower, dragged down in part by the fall in the  Kiwi,  and has accelerated in NY on the back of the broad based US$ strength.

Today may see a bit of a blip after the local construction data but the Aud is going to take its direction from the US jobs data later today and a decent reading from the NFP will see a real test of the strong 0.7740 level. Below this, further bids would arrive at 0.7720/25 ahead of 0.7700. A break of this level would then head towards the channel support at 0.7680 and then on to the 12 Feb low of 0.7643 and possibly to 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.

On the topside, with the indicators now pointing lower I would be surprised to see 0.7800 again today. If wrong further gains would run into headwinds at 0.7815 (200 HMA), beyond which 0.7840 and 0.7860 will again provide strong resistance.

Further US$ strength appears to be in store and a test of 0.7700 is favoured.

Economic data highlights will include:

M: AIG Performance of Construction Index.

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NZD/USD: 0.7479

The Kiwi is lower today as the slide from the 0.7596 Asian high continued, and has so far been down to 0.7453.

In falling so hard, the Kiwi has easily taken out the 0.7500 support and has come to a halt just ahead of the Fibo support at 0.7445 (38.2% of 0.7175/0.7610). A break of this though would then head towards the next target the 13 Feb low at 0.7410 and then 0.7400.

Below 0.7400, would move back to minor Fibo supports 0.7375 and 0.7325 (50/61.8% of 0.7175/0.7573). I don’t really see it down here yet, but if wrong, further bids would arrive at the 12 Feb session low at 0.7313 and then again at 0.7300.

Further out, below 0.7300 would see a run towards minor supports at 0.7250 and 0.7225, and then further out we could then be in for another test of 0.7200 and the trend low of 0.7185. Below this there is little support to be seen until the spike low at 0.7115 (17 Mar 2011) and even further out, I think we are eventually headed towards 0.6962 (38.2% of 0.3900/0.8842) and possibly to the 200 Month MA at 0.6538. Don’t get excited; this is still a long way off.

On the topside, 0.7500 will now act as solid resistance ahead of the 100/200 HMA’s at around 0.7540. The hourlies are oversold and may need some time to recover, but the longer term indicators are turning lower so selling into strength appears to be the plan.

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