US$ eases back ahead of today's GDP. Market focus turning to tomorrow's EU CPI.

It has been a reasonably steady session in the absence of any major data to move the market although the commodity bloc has generally had a solid session. Things could warm up today, with the German Unemployment and CPI due ahead of the US GDP, Pending Home sales, Jobless Claims, Personal Consumption/Expenditure Prices. Friday sees the EU CPI, and the market will be looking towards this, as a low reading could be the catalyst for Mario Draghi to act and to add liquidity, including the possibility of Quantative Easing, at next Thursday’s ECB meeting. Ahead of the EU/US data, Australia gets New Home sales and Private Capex figures while NZ gets the Business Confidence numbers.

EUR/USD: 1.3195

Having made a new trend low at 1.3152 in Asia, the Euro has squeezed a bit higher as the consolidation continues since the gap lower at Mondays open. Currently at 1.3200, the Euro has been underpinned during the latter half of the session by what has been attributed to comments from the German finance minister Schaeuble, who said that the market may have “overinterpreted” the recent comments by Mario Draghi. He was referring to Draghi’s Jackson Hole comments that the ECB “stands ready to adjust policy stance further”.

Later on, a Reuter’s story quoting unnamed ECB sources stated that new ECB action at next week’s meeting is unlikely unless the August CPI data (Friday) shows the EU to be heading significantly towards deflation saw a bit of a squeeze higher with the Euro touching a brief high at 1.3215.

Since then the Euro has had a reasonably steady session and now awaits a busy day as we look ahead to the German Unemployment (exp 6.7%/-5K) and then later the provisional German CPI (exp 0.8%YY) and the US Q2 GDP(exp 4%YY). Pending Home sales and Consumption/Expenditure is also due, as well as the weekly jobless claims.

Technically there is little change, although it looks to me as though the Euro may have put in a short term base and given the positive momentum on the short term charts as they continue to unwind, could make an attempt to close the gap from Monday’s opening. Stronger than expected German data and/or weak US data would help it on its way.

Today’s session high has been 1.3215 (100 HMA) a break of which would hint at a return to 1.3235/40 which would close the gap and is where the minor descending trend resistance currently lies. Above here would head to the 200 HMA at 1.3270 and then possibly to 1.3300/15 where strong resistance is seen, this being the base of both the monthly (1.3300) and weekly cloud (1.3315).

On the downside, minor support lies at 1.3170 below which 1.3150 is again likely to be protected by option related buyers. Below that, there is not too much to hold it from heading quickly towards 1.3104 (6 Sept ’13 low), a break of which the next target is found at the Fibo support (76.4% of 1.2754/ 1.3993) at 1.3045, which when seen should prove strong support.

For today, buying dips appears to be the plan, with a stop and reverse placed below 1.3150. Use 1.3175/1.3235 as a guide, with the data to dictate the direction.

Further out, I still think the dollar will regain its legs as the trend continues and 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.

Economic data highlights will include:

German Unemployment, CPI, US GDP, Pending Home sales, Jobless Claims, Personal Consumption/Expenditure Prices

EUR/USD: 4 Hour.   MT4:Axitrader

USD/JPY: 103.85

The consolidation, using 104.00 as a pivot has largely continued today and after an early squeeze to 104.15 the Yen has found some minor strength in falling to a low of 103.77, but closing at 103.90 in quiet fashion.

More of the same is possible as the dollar unwinds its short term overbought condition and with a big day of Japanese data coming up on Friday, profit taking is again likely to cap the upside ahead of the month end.

A break of 103.70 would see a bit of a run back towards the 200 HMA at 103.50 although I am not sure that we are likely to see this today unless the US data is very soft, pulling the dollar lower. If wrong, a break lower would head back towards 103.23(38.2% of 101.50/104.26) and then to 103.00.

On the topside we need firstly to regain 104.00 and then the session high of 104.15. I doubt we are going to make a new trend high above 104.26, but if wrong look for a run up towards 104.50. As we said before, a break of 104.50 would head on towards 105.00, and beyond that, I suspect that we are eventually headed back up towards the 200 month MA at 106.50.

Look for the dollar to do much the same today and once again use something like 103.70/104.15 to cover it; at least until the UD data is released.

Economic data highlights will include:

Foreign Bond Investment

USD/JPY: 4 Hour.   MT4:Axitrader

GBP/USD: 1.6575

Having retested Monday’s 1.6535 low in Asia, Cable later squeezed up to  a high of 1.6604 today, in line with the firmer Euro but was unable to carry on and has since fallen back to close the session at 1.6575.

More consolidation looks likely today as the short term charts regain their balance having become oversold and it could be the 1.6550/1.6600 largely covers it.

The bias today is mildly to the topside though and if we do crack 1.6600, the 200 HMA at 1.6615 would be then next hurdle. Beyond this would see a potential acceleration towards the top of the descending channel at 1.6665, but seems rather unlikely right now.

On the downside, 1.6650 and 1.6535 are the immediate supports and I am doubtful of heading below here today. If wrong, look for a run towards 1.6500 and then eventually towards the 24 March low at 1.6462.

GBP/USD: 4 Hour.   MT4:Axitrader                                                                                                                                

USD/CHF: 0.9148

US$/Chf made another trend high at 0.9184 today, before turning lower once again, falling to 0.9137 before closing mildly higher.

The bias remains mildly to the downside today although we now have a minor double bottom at around 0.9137/40 which should provide some support.Below here would see a return towards 0.9115 and 0.9100(daily Kijun/Tenkan) although I don’t see the dollar below here today. If wrong, further losses could take see an acceleration to the downside with the first stop being at around 0.9060.

On the topside, above today’s 0.9184 high, would open up the chance for a run up towards 0.9200 and to the November 2013 high at 0.9249.

Use 0.9115/0.9175 as a guide.

USD/CHF: 4 Hour.   MT4:Axitrader                                                                                                                                

AUD/USD: 0.9336

The commodity bloc has had a good day today with the Aud briefly reaching 0.9351 before some profit taking set in to take it back to close at around 0.9335.

Today sees some minor data, including the Capex, but it will probably be a rangebound session as we await the US GDP later in the day.

The 4 hour charts still look positive although the resistance that lies ahead appears to be strong, starting at  0.9340 (100 DMA) and then at 0.9355 (daily cloud base/Kijun), above which sellers are reportedly lined up all the way to  0.9373(6 Aug high) and 0.9380 (61.8% of 0.9472/0.9236), where I think it would be approaching sell territory. If wrong, and the Aud is able to make further gains, then the way would open up for a run to 0.9400 and possibly to 0.9416 (76.4%).

On the downside buyers are now seen close by at 0.9325 and below here at 0.9315/00. Below here seems unlikely in the short term, but if wrong look for a run back towards 0.9285 and eventually towards 0.9260.

Further out, a sustained break of the recent 0.9236 low would most likely see an acceleration towards 0.9200, below which, 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 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.

Use 0.9325/55 as a guide for the first half of the day while waiting for the US data.

Economic data highlights will include:

New Home sales, Private Capex

AUD/USD: 4 Hour.   MT4:Axitrader                                                                                                                                

NZDUSD: 0.8375

The Kiwi squeezed a bit higher today, reaching a peak of 0.8380 as it joined in the generally positive session for the commodity bloc.

Further consolidation looks the most likely outcome, and with the 4 hour charts showing some bullish divergence it could be the topside that comes under some pressure for a test of the descending trend resistance/200 HMA at around 0.8400. A break would see stops getting triggered which could take the kiwi on to 0.8430 (23.6% of 0.8514/0.8310) but at this stage seems unlikely.

The downside will find bids at the 100 HMA at 0.8360 and then at the session low at 0.8328. I don’t think we see it down here today, but further losses would take the kiwi back to the trend low at 0.8310.

Further out, a break of 0.8300 would hint at a run towards 0.8275(50% Fib of 0.7670-0.8839) and then 0.8242 (February 20 low,).Below this would suggest further losses towards the 5  Feb  low  (0.8187) and possibly to the 4 Feb low (0.8051).

Look for 0.8350/0.8400 as a rough guide.

Economic data highlights will include:

ANZ Business Confidence

NZD/USD: 4 Hour.   MT4:Axitrader