ECB Unchanged. Soft US data undermined the dollar. Australian Jobs data ahead.

The ECB left policy unchanged, as expected, with Mario Draghi sounding mildly upbeat at the Press Conference, but saying nothing that we did not already know aside from a solid commitment to the QE programme until Sept 2016 – which the equity and bond markets liked. Elsewhere, more soft US data, putting any imminent Fed rate hike in doubt, has seen the dollar head lower on all fronts while at the same time boosting commodity prices, where WTI in particular, had a strong session. Today will kick off with the NZ Business PMI, the Australian Jobs data and the China FDI, after which it will be a bit thin until the US session when the Housing Starts, Jobless Claims, Building Permits, Philadelphia Fed Mfg Survey are all due.

EUR/USD: 1.0682

The ECB left rates unchanged today, as expected. Mario Draghi said in the post meeting press conference that “there’s clear evidence that the monetary policy measures we’ve put in place are effective”, expressing optimism for “the economic recovery to broaden and strengthen gradually.” He also pledged to maintain quantitative easing program until September 2016 or until there is “sustained adjustment” in inflation. Equity and bond markets liked what he had to say and both had decent sessions.

Later in the session, the US data was generally soft once again, where the Industrial Production figure dropped more than expected, by -0.6% in March (vs exp of -0.2%) ,  Capacity Utilisation was 78.4%  (vs exp 78.7%) and the Empire State Manufacturing index dropped sharply to -1.19 in April, (vs exp of +7.0). This has combined to put the dollar back under pressure as thoughts of a delay in any potential rate hike keep the market on the defensive.

Today will be slightly less busy on the data front, with little of note due from the EU, although there are some secondary numbers to be released from the US, with the focus likely to be on the Housing Starts and the Jobless Claims.

Technically the Euro has bounced off the early London low of 1.0570 and has spent much of the session since then chopping around within the 1.0600/1.0700 range, where the sellers at the top end have so far capped it.

The shorter term charts though, do look positive and another run to 1.0700 would not surprise, a break of which would then attempt to overcome yesterday’s session high at 1.0708 and 1.0715 (38.2 of 1.1035/1.0520). Beyond that would see further progress towards the 200 HMA (1.0740), the daily Kijun at 1.0755, and then to the stronger level (50% pivot of 1.1035/1.0520 /daily Tenkan) at 1.0775. The hourlies are showing the potential for a short term bullish flag formation, which, if it comes about could then take the Euro on to 1.0800 and to 1.0835 (76.4%) although this may be a struggle today.

On the downside, there is minor support now at 1.0660 and 1.0610 (100 HMA) ahead of the stronger consolidation band between 1.0600/1.0570, below which further buyers will again gather at the recent lows at 1.0520/30. A break of 1.0520 would signal a run to 1.0500 and then towards the previous, 13 Mar, 1.0461 low. Beyond there, support is again rather thin until we meet the March 2003 low at 1.0334.  Under this would likely see another acceleration lower, as there is then very little left to hold it up ahead of the major descending channel base at around 1.0200 (monthly chart below) and then at the Fibo support at 1.0069 (76.4% of 0.8225/1.6037), below which parity will become a magnate.

In the short term, buying dips to 1.0650 looks to be the plan although below there would signal that the upside may be running out of steam and we could then be in for another turn lower

Economic data highlights will include:

US Housing Starts, Jobless Claims, Building Permits, Philadelphia Fed Mfg Survey…

Meta Trader – AxiTrader    EUR/USD: 4 Hour

USD/JPY: 119.08

US$Jpy has headed lower today on the back of more soft US data and a surge in the oil price, and has made a strong attempt to break below the rising trend support after reaching a low of 118.78, where the daily cloud base has so far propped the dollar up.

Currently back at the 100 DMA at 119.20, the support is currently holding, but further downside momentum looks possible, at least according to the 4 hour charts, where further levels to watch would be at the 26 March low (118.32), the Fibo support at 118.20 (61.8% of 115.85/122.02) and at 118.00, but below which there is not too much to provide support until 117.30 (76.4%).

The topside will find sellers at today’s session high at 119.74 and then at the 200 HMA at 119.85. 120.00 looks to be out of reach, but if wrong, further gains would open up a move towards 120.50, 120.85 (both minor) and 121.00. As before, although unlikely to be seen yet, a topside break of 121.00 would open up the 20 March high at 121.20, the consolidation area at around 121.50 and the 10 March high at 122.02. If/when this level can be overcome, the way would open up for a run towards the 15 July 2007 high at 122.42, and in the longer term, the target of 124.13 (17 June 2007 high) would appear on the horizon but will take time.

Economic data highlights will include:

Japan Foreign Stock/Bond Investment.

Meta Trader – AxiTrader    USD/JPY: 4 Hour

GBP/USD: 1.4837

Cable joined in the general strength today against the dollar, after more soft US data, and saw a run up from 1.4700 to a high, so far, of 1.4852.

The indicators are once again supportive and buying the dips seems to be the plan, where the points to watch  on the topside are at 1.4852 (session high) and then 1.4875 (minor) ahead of 1.4900. Beyond this would look at 1.4930 which should be very strong resistance(61.8% of 1.5165/1.4565 and 38.2% of 1.5551/1.4565). Above here would then take another look at the resistance just below 1.5000 which has capped Cable at the last 4 attempts, and thus, should again be very strong.

On the downside, the initial support will now be seen at 1.4800 and then at the 200 HMA at 1.4780. A break of this would open the chance for a deeper run towards 1.4700 and possibly lower, although this looks doubtful today.

Further out, below 1.4700, would see a run back towards 1.4640 and then to 1.4600. The recent 1.4565 low looks too far away at present, although if wrong, a break of this would suggest a run towards the June 2010 low at 1.4549 and then to the May 10 low at 1.4403. Below here would see a capitulation towards the 76.4% Fibo support of the rally from 1.3502/1.7091 at 1.4375 (monthly chart below) and then to the base of the 2009/2010 fall from the 1.7041 high to the low, seen at 1.4229 in May 2010.

Meta Trader – AxiTrader    GBP/USD: 4 Hour

USD/CHF: 0.9645

The dollar did head lower again, as we thought it might yesterday, today reaching 0.9634 after an early London squeeze to 0.9770.

The short term charts remain negative, and on a break of the session low, we could yet see another test lower, towards 0.9600  and then towards the 7 April low at 0.9556, below which could see another decline to 0.9500.

On the topside, sellers will gather at the 200 HMA at 0.9685 and then at 0.9700, above which would head back into the consolidation area for more choppy, sideways trade.

The dailies are flat, so while trading from the short side may again be the near term plan, I remain neutral in the medium term.

Meta Trader – AxiTrader     USD/CHF: 4 Hour

AUD/USD: 0.7681

After a choppy session of trade either side of 0.7600 going into Europe, the Aud shot higher today after the release of the soft US data. It was assisted by firmer commodity prices, squeezing the shorts in reaching 0.7700, before drifting slightly lower into the end of the NY session.

The focus today will be on the jobs data (exp +15.6K, 6.3% and PR of 64.6%). A weak number will see the Aud fall back towards the RBA’s stated target of 0.7500 as thoughts of a May RBA rate cut come to the fore, while a firmer reading will place 0.7700 under severe pressure, above which would see a run towards daily cloud base at 0.7720 and to the 9 Apr high at 0.7737, where the daily Kijun will provide resistance. Above here would head towards 0.7760 and then on to 0.7800.

The downside is going to find support today at 0.7645/50 and then at 0.7630 (100HMA) below which would head back to 0.7600. If the jobs data comes in at close to expectations, the Aud is unlikely to head under here in the near term, but if the number is weak we could then get a move back to 0.7570 and 0.7550 which has proved to be strong support recently.

Below there, which looks a little unlikely today, would see a retest of 0.7532 (2 April low). Below this , the RBA’s line in the sand at 0.7500 will provide stronger support but a break of which would open up the way to 0.7414 (Oct 2010 low). Beneath this there is a bit of a black hole until the very strong support at around 0.7200, where two important Fibo levels are lining up (0.7210: 61.8% of 0.4773//1.1082 and 0.7180: 76.4% of 0.6006/1.1082). I suspect that eventually 0.7000 will appear on the horizon (and even 0.6000!), but this is going to be some way off yet.

Economic data highlights will include:

New Vehicle Sales, Unemployment,  China FDI.

Meta Trader – AxiTrader    AUD/USD: 4 Hour

NZD/USD: 0.7589

The Kiwi has made up some good ground today following the soft US data, in climbing from 0.7486 to reach a high of 0.7617 before pulling back to finish the session at 0.7590, but above the 100 DMA at 0.7580.

Today will be largely dragged around by the Aud following the jobs data although before then NZ gets to see the Business PMI (previous 55.9).

While the longer term indicators remain pretty flat, suggesting more choppy trade lies ahead, the short term charts do suggest the chance of another squeeze higher. Above the day’s high will find resistance at 0.7630 but above which would then head towards 0.7665 and then 0.7700 which should be very strong. If we do head above here, look to sell at the descending trend resistance at 0.7733, with a tight stop loss placed above 0.7750.

The downside currently looks underpinned at 0.7550 but below which would head back towards 0.7535 (200 HMA) and to 0.7500. Below here seems unlikely but further bids would arrive at are at 0.7485 (session low) and 0.7440 (rising trend support).

Further out the week’s low is seen at 0.7421, the 1 April low at 0.7390 will come into view although I doubt that we head there today. If wrong, below 0.7390 there is minor support at 0.7372 (19 March low) and at 0.7326 (18 March low) and at the Fibo support at 0.7307 (76.4% of 0.7175/0.7696), a break of which would head back to the important base at 0.7270. Below here the Kiwi is headed back to 0.7175 (11 Mar low) and then to 0.7000.

Economic data highlights will include:

NZ Business PMI.

Meta Trader – AxiTrader    NZD/USD: 4 Hour