Euro steady despite weak GDP. UK GDP, US PPI coming up later.

Aud, Kiwi firm and looking to consolidate gains.

It has been a choppy session in currency markets although the majors have finished the session largely unchanged against the dollar, with the commodity bloc showing the best gains. Some conciliatory comments from Putin re. the Ukraine helped equities head higher while the other major mover was oil, where WTI fell 2% after  the soft data today suggested the possibility lower demand while supply remains abundant. Today should be largely quiet given that much of Europe is on holiday. There is nothing due in Asia. The UK gets the GDP while from the US the focus will be on the PPI and Consumer Sentiment data.

EUR/USD: 1.3365

Having headed lower after the weaker than expected German/ French CPI’s,  the Euro based out at 1.3348 following the slightly weaker than expected EU CPI/GDP numbers (German 2Q GDP -0.2%, France 0.0%, EU 0.0%) and then recovered to a high of 1.3396 as short covering set in ahead of renewed selling at 1.3400 capped further  gains. Further choppy trading ensued and the Euro later hit a session high of 1.3407 following the worse than expected US jobless claims that saw the dollar come under some pressure, before recovering later on, to finish the day pretty much where it had started.

With much of Europe on holiday today, the market will have to wait for the US data to provide any direction, but as the week winds up, further consolidation above the 1.3335 area would not really surprise.

The points to watch remain the same.

The short term triple bottom at around 1.3335 remains intact and this needs to give way before the Euro can head lower towards 1.3294 (7 Nov ’13 low) below which, more distant targets are seen at 1.3228 (61.8% of 1.2754/1.3993) and then eventually at 1.3104 (6 Sept ’13 low).

A break back above Wednesday’s top at 1.3415 would see an acceleration towards last Friday’s spike high at 1.3433. Above there, which looks a bit unlikely today, we could then be in for a run up towards 1.3470 (38.2% of 1.3699/1.3332) and possibly 1.3485 (23.6% of 1.3993/1.3332/ daily Kijun). Above this would see more stops triggered and could force an acceleration higher towards 1.3500, which previously acted as strong support and should now provide good resistance. A break of 1.3500 would test 1.3525 (38.2% of 1.3993/1.3332), beyond which could head up to the base of the previous wedge formation (blue line), currently at around 1.3575.

The bigger picture remains unchanged. While the dollar uptrend remains intact, the eventual target for the Euro appears to be the 9 July low 2013 at 1.2754, albeit that it looks somewhat distant for the time being.

Today’s plan again remains pretty much unchanged. Continue to hold a core short position but leave room to sell into strength with a SL above 1.3440, but looking for a run below 1.3335 towards 1.3300 and eventually a fair bit lower.

Economic data highlights will include:

EU Assumption Day holiday, US PPI, Industrial Production, Capacity Utilisation, Rts/Michigan Consumer Sentiment Survey

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EUR/USD: 4 Hour

USD/JPY: 102.45

US$/Jpy remains largely uninteresting and after an early squeeze higher to 102.65 it later fell back to 102.30 before finishing the NY session pretty much in the middle, with more of the same looking likely today.

The 100/200 HMA’s are crossing higher at around 102.30 and this will probably support the dollar again today. A downside break would then see the chance of a return to 102.00 where the top of the weekly cloud and the weekly Tenkan provide solid support. Below here seems unlikely, but if wrong, further support sits close by, where the daily cloud lies, albeit that it is very thin, with the top/bottom parameters being at 101.85/90. Below there could see another fall to Friday’s 101.50 low, but which looks doubtful, although a break of which would see a return to the strong support just above 101.00, where semi official bids were previously rumoured to lie. I doubt we are going to pay a visit down here any time soon, but if wrong, further very strong support lies at the horizontal blue support line (chart) at around 100.80

A break above the session high would meet further minor Fibo resistance at 102.70 beyond which would point towards the recent spike high of 102.93, which comes ahead of the 30 July high at 103.08. If and when 103.00/10 is overcome, then we would most likely be in for an acceleration towards the 3 April high at 104.10. This looks to be some way off at this stage and I doubt that we see it this week but beyond 104.10 the next target coming into view would be the 21 Jan high at 104.74.

Use 102.30/70 as a guide today.

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USD/JPY: 4 Hour

GBP/USD: 1.6685

Cable headed a bit lower but found good support at 1.6657, (15 Apr low), where the 200 DMA at 1.6660 propped it up, before bouncing to 1.6696 in unison with the squeeze higher in the Euro, and then chopping around in the middle of the range for the remainder of the day.

Today sees the UK GDP (exp 0.8%qq, 3.1%yy) which will provide the direction and a failure to meet expectation would see the 1.6650 support taken out, with Cable then likely to head to the Fibo support at 1.6630 (23.6% of 1.4813/1.7191). Below here would have quite bearish implications and could potentially head towards the 4 April low at 1.6551.

While Cable remains weak, as seen on the dailies, the short term charts are attempting to unwind their oversold condition. If the GDP is a good reading, then 1.6700 will again be quickly tested. A break of this would see a run back up towards 1.6730 and then on towards Tuesday’s 1.6754 low, which now will act as resistance. Above here, which looks a bit unlikely today unless the GDP is very strong, would see a squeeze back to 1.6800(23.6% of 1.7191/1.6688) and then to the weeks high and descending trend resistance at around 1.6840.

As before, selling into strength seems to be the plan, with a SL placed above 1.6750.

Economic data highlights will include:

UK GDP

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GBP/USD: 4 Hour

USD/CHF: 0.9065

US$/Chf had a choppy day within a 0.9035/85 range and it would seem that this could cover it again today given that much of Europe is on holiday

The technical points remain unchanged.

The initial support is still at 0.9050, (weekly cloud base) and comes ahead of the 0.9035 low.  A break of 0.9030 would see a run down towards 0.9000/10 which had proved rather sticky on the way up, where rising trend support will see decent bids. Further bids should be seen at 0.8985/90, although I am not sure that we see it down here today. If wrong, below there would test rising trend support, currently at 0.8965 and then the 200 DMA at 0.8945.

On the topside, 0.9085 will again prove tough to break today, but if it dies, the dollar could head higher towards 0.9100. If/when we can overcome 0.9100 and then last week’s 0.9114 high, then we could then head on towards 0.9130 (23.2% of 0.9838/0.8698), beyond which would see a run up towards the 100/200 WMA’s, which both currently lie at around 0.9160. This should be strong resistance but a break of which would suggest a run up towards 0.9190 (20 Nov ’13 high) and then to 0.9249 (7 Nov 13 high).

Use 0.9035/85 as a guide again today.

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USD/CHF: 4 Hour

AUD/USD: 0.9315

The Aud has squeezed slowly higher through the session, topping out so far at 0.9326, where the 38.2% Fibo (0.9471/0.9239) level at 0.9325 provides the resistance. The 4 hour charts are showing some positive momentum, and a break higher would meet sellers at around 0.9335/40 (100 DMA: 0.9335), a break of which would potentially see a run back towards the 6 Aug high at 0.9373.

The hourly charts are actually hinting at some mild bearish divergence up here and if that turns out to be accurate we would head back towards bids at 0.9300. Below here would then suggest a return towards 0.9285 and then to the strong 0.9260 area. A break below 0.9250 would find further support at Friday’s 0.9239 low, beneath which would most likely see some acceleration towards 0.9200. Under here, the next target would be the 200 DMA/38.2% Fibo support of the rally from 0.8660/0.9505 at 0.9175. A break of this could see a much deeper move towards minor support at around 0.9135 and then to 0.9100 and maybe to 0.9050 (50% pivot of 0.8660/0.9505).

For the time being it looks as though 0.9300 will continue to hold the Aud up, and we could yet see a squeeze back towards 0.9375, but in the bigger picture I still prefer to trade from the short side and will use a rally to sell into, looking for an eventual break below the 0.9250 support for a run towards 0.9175. Don’t get too excited, this could take a while.

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AUD/USD: 4 Hour

NZDUSD: 0.8490

Short covering persisted into Europe, after the stronger than expected NZ retail sales data, squeezing the Kiwi up to a high of 0.8510 before it dipped back to 0.8480 and then traded near 0.8490 for the remainder of the session.

In the absence of any major data today, I would expect a reasonably quiet session, fairly close to current levels, but the 4 hour charts remain positive and another test of the session highs should not be ruled out. Beyond there, 0.8535 (1 Aug high) will see sellers, above which the Kiwi could make a run towards 0.8586 (25 July high). Further out, it could be that the Kiwi wants to make a run back to 0.8615, where strong resistance lies in the shape of the daily cloud base/daily Kijun/100 DMA.

If the Kiwi fails here, the downside would head back towards support at the daily Tenkan/200 DMA at 0.8460/65. I don’t think we are heading under here today, but if wrong, 0.8430 will find bids ahead of the recent 0.8408 low (38.2% of 0.7718/0.8835) today. Further support would be seen at the 4 June low at 0.8401. If/when 0.8400 eventually gives way, a deeper correction would most likely head rather quickly to 0.8275/0.8300, with little support to be seen in between there and 0.8400. Unlikely for now and I suspect that we are more likely in for another run back towards 0.8500 and possibly higher.

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NZD/USD: 4 Hour