Euro recovers from new lows after Greek election result. Focus now turning to FOMC (Wed).

An early sell-off in the Euro has been reversed, on the back of some profit taking following the result of the Greek election, with focus now turning towards Wednesday’s FOMC Meeting. Ahead of that, today’s action will come care of the German Retail Sales and then the US Durable Goods Orders. The Aud also got a reprieve ahead of tomorrows CPI although the Kiwi remains heavy, at trend lows, ahead of Thursday’s RBNZ Meeting. US Stocks have been choppy, but firm, following the solid performance from EU equities, where the DAX finished at an all time high. Commodities are a bit lower.

EUR/USD: 1.1265

An early Asia selloff, when the Greek election results were coming through, saw the Euro fall to a new multi year low of 1.1097, before a recovery allowed it to find its balance and squeeze steadily higher through the day, underpinned by the better than expected  January German IFO reading, where the business climate rose to 106.7 (exp 106.5), a six month high, while the current assessment gauge rose to 111.7 (exp 110.8).

The outcome of the Greek election result is yet to be fully determined but Greece’s current bailout expires on 28 February, and despite the general view that a Greek EU exit is unlikely, without any agreement to extend the programme, Greece’s banks will be unable to borrow and would be required to depend on emergency funding liquidity. This could effectively mean that Greece may be forced into defaulting on its loans, potentially forcing an exit, which would then open a whole new can of worms. Time will tell…!

Technically, the short term charts are in recovery mode and it looks as though there may be more room to the topside. Above the session high of 1.1295 would see the Euro take a look at minor Fibo resistances at 1.1315 and 1.1385, beyond which the 100 HMA lies at 1.1415 and the next Fibo level at 1.1455 (61.8% of 1.1680/1.1097).

Right now the major Fibo level at 1.1227 (61.8% of 0.8225/1.6037) is acting as a pivot, which may continue to be the case, but if we do head back to 1.1200, there is not too much to hold it up above yesterday’s low. Under there,  the next obvious target is at 1.1000, where many analysts had previously been looking for a 2015 low, although the next realistic technical level is not seen until the September 2003 low at 1.0759, beyond which we are going to zero-in, eventually, on parity. At risk of sounding like a broken record, I have been saying over the last few months that the charts suggest that we are going to eventually head to 0.8000.

For today, look for a day of 1.1200/1.1350, with a mild bias to the upside, but with direction to be decided by the data, headlined today by the German Retail Sales and then by the US Durable Goods Orders & Consumer Confidence.

Economic data highlights will include:

German Retail Sales, US Durable Goods Orders, Consumer Confidence, New Home Sales, Case/Schiller Home Price Index, Richmond Fed Mfg Index.

Meta Trader – AxiTrader     EUR/USD: 4 Hour

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USD/JPY: 118.45

US$Jpy remains choppy, and continues to trade within the rough triangle formation that has been building for the last month or so. Having  fallen to take an early look at 117.26, the dollar is currently on its highs and looking as though it may be wanting to make a break towards 119.00, although the charts are not really suggesting such a move is particularly likely and that we should probably expect more of the same choppy trade near current levels.

If we can take out the resistance that lies immediately ahead at 118.50, then the recent high at around 118.80 will provide the next hurdle to be overcome. A break of this would head to 119.00, a break of which would then signal further gains towards the 12 Jan high at 119.30, beyond which 119.95 (8 Jan high) will come into view.

Further out look for a run towards 120.00 above which will suggest further gains towards the minor triple top at around 120.75. Eventually I suspect that we are heading towards 121.00, but not yet. If/when we do, do so, further advances towards the trend high at 121.85, 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.

The downside will now find bids at 118.05 (100 HMA) and at 117.70 (200 HMA), below which would head back towards the session low and to the rising trend support, now at 117.00. Below that would then allow a sharper run lower, towards 116.00 and possibly to the Fibo support at 115.50 (38.2% of 105.18/121.84), and which if seen would be a good area to start picking up some dollars.

Overall, look for more choppy trade, but with a mild upside bias, but probably 118.00/119.00 may well cover it..

Meta Trader – AxiTrader     USD/JPY: 4 Hour

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GBP/USD: 1.5078

Despite an early dip to 1.4975 in early Asian trade, Cable remained generally underpinned today after some hawkish BOE comments, that rates could rise sooner than expected, and is finishing the US session close to its highs of 1.5099.

Technically, further gains look possible but will ultimately depend on the outcome of the provisional Q4 UK GDP (exp 0.6%qq, 2.8% yy) and then later, on the US Durable Goods data. The 4 hour charts are positive but will find resistance nearby at 1.5105 (23.6% of 1.5620/1.4950) and then again at the 200 HMA at 1.5120, beyond which Cable could head on towards 1.5200 (38.2% of 1.5620/1.4950).

Currently sitting right on the 100 HMA, this could continue to act as a pivot, but further downside movement would see a retest of 1.5040 and 1.5000.  Under here, 1.4985 and then Friday’s spike low at 1.4950 will see buyers, although I don’t see this area being bothered today. If wrong, below 1.4950 would head to 1.4915 (61.8% of 1.3502/1.7191) and then, some way off, towards the July 2013 low at 1.4813. Below this could get ugly as there is not too much to hold Cable up ahead of the 76.4% Fibo level (1.3502/1.7191) at 1.4375.

For today, use 1.5040/1.5140 as a guide, but keep an eye out for any surprises in the data.

Economic data highlights will include:

UK GDP.

Meta Trader – AxiTrader     GBP/USD: 4 Hour

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USD/CHF: 0.9011

As before, I would tend to avoid US$ Chf for now, at least while Eur/Chf continues to find a comfortable level. The cross has been very volatile again today in trading a 0.9782/1.0160 range and is best left alone.

Having said that, I am long a small amount of US$Chf as I still like the US$ over the longer term, and I suspect that buying dips towards 0.8800/0.8700 is probably the plan, with a SL below 0.8675.

If/when the Euro (EurUsd) heads lower, towards 1.10, and possibly in the longer term towards parity, then US$Chf may find the legs to head back towards 0.9500 and higher. Keep positions very small, or avoid it altogether.

Meta Trader – AxiTrader      USD/CHF: 4 Hour

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AUD/USD: 0.7917

Having seen an early dip to a low of 0.7857, the Aud has squeezed higher through Europe and NY, assisted by buying in Aud/Jpy, so far reaching a peak against the US$ of 0.7933.

There is a bit of secondary, local data dues today (NAB Business Confidence) although the US Durable Goods are likely to be the main focus. The main event for the week though, will be tomorrow’s CPI (exp 0.3%qq, 1.8%yy) and while we may get a short covering to squeeze before then, a CPI reading below estimates would erase any gains as the market begins to feel that an RBA rate cut could become a reality at the Feb 3 meeting.

Technically, the chances of a further short squeeze seem reasonable, which could propel the Aud towards 0.7942 (23.6% of 0.8230/0.7857), 0.7955 (minor) and then towards 0.8000 (38.2% of 0.8230/0.7857), which should be very strong. A break above 0.8000 though, could see further gains towards the 100 HMA (0.8040) and then to 0.8085 (61.8%), although I don’t see it happening today.

The downside will see bids once again at 0.7900, a break of which would head towards Monday’s low, where the descending channel base is providing support. Under 0.7850, which seems unlikely today, would head towards 0.7800 and then to 0.7765 (200 Month MA), the July 2009 low at 0.7700 and beyond, possibly to the RBA’s stated target at 0.7500, albeit not for a while.

For today, look for a range of 0.7885/0.7985 to cover it.

Economic data highlights will include:

WBC Leading Index, NAB Business Confidence/Conditions, China Leading Economic Index.

Meta Trader – AxiTrader      AUD/USD: 4 Hour

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NZD/USD: 0.7408

Some strong interest to buy Aud/Nzd has seen the Kiwi stay under pressure on all fronts, and despite an early squeeze up to a high of 0.7468 against the US$, the Kiwi has headed steadily lower, to a new trend low at 0.7397, before steadying, to close the session just above 0.7400.

Following the recent, surprise BOC rate cut, many analysts now expect the RBNZ to temper their rate stance on Thursday morning, which comes an hour after the FOMC meeting. If they do strike a more dovish tone, then we are likely to see the Kiwi head lower towards the Nov 2011 low, at 0.7370, beyond which there is only minor support (20 Mar 2011 low: 0.7290) to hold the Kiwi up ahead of the 76.4% Fibo support and 17  Mar 2011 low seen at 0.7115.

The topside sees resistance at today’s 0.7468 high, above which would head towards 0.7500 and possibly to the 100 HMA currently at 0.7530. I don’t think this should be a concern today, but if wrong, look for a run towards the descending trend resistance, currently at 0.7565.

Look for a 0.7370/0.7470 range, with a preference to sell into strength, looking for a continuation of  downtrend to continue.

Meta Trader – AxiTrader     NZD/USD: 4 Hour