AUD/USD: 0.9282EUR/USD: 1.3260The dollar is stronger today following the slightly hawkish stance of the FOMC Minutes, which hinted at the potential for an earlier-than-expected hike in interest rates. Nothing is likely to happen any time soon though, and equities liked that idea in continuing their positive trend, with the S+P regaining its all time high. Markets will now most likely sit on their hands until Friday’s economic summit at Jackson Hole, where both Janet Yellen and Mario Draghi will be speaking on Friday. Ahead of that, the main focus will be on today's global manufacturing and services data, and the UK Retail Sales
The dollar is stronger again, having been bid all day, and is closing the US session on its high following the slightly more hawkish take on the FOMC Minutes. The main headline suggested that Fed policymakers wanted more evidence before hiking rates although some members felt that a “relatively prompt” move may be warranted.
The Euro could well remain under further pressure today if the manufacturing PMI's come in below par although there is plenty of other data out as well (US Jobless Claims, Philly Fed & Existing Home Sales) to provide some direction ahead of tomorrow’s economic summit at Jackson Hole. With both Janet Yellen and Mario Draghi speaking it could be a busy end to the week, with the market looking particularly towards Draghi, who many feel may use the summit to announce a further easing of liquidity in order to boost growth in the EU. Watch today’s PMI’s closely.
Technically, having taken out the support at 1.3300, the Euro has headed down to a low, so far of 1.3255. It still looks very heavy, although there are bids protecting 1.3250, which may hold through the Asian session. The rapid fall this week has been a bit of a surprise, but now we are down here, and having broken well away from the base of the weekly cloud (1.3315) the way does appear to be open to lower levels. The next meaningful supports are to be seen at 1.3228 (61.8% of 1.2754/1.3993), below which there is not a huge amount to hold the Euro up ahead of 1.3104 (6 Sept ’13 low).
While the strategy of holding a core short Euro position remains in place, the shorter term charts are oversold and we do need to allow for a bounce, which could well come about if Janet Yellen is more dovish than anticipated, which would undermine the dollars recent run, and/or Draghi is less dovish, which would put a bid tone back in the Euro. Overall if not already short, look for levels to sell into seems to be the play.
The points to watch on the topside are initially at the minor Fibo level at 1.3290. Above 1.3300, which looks a bit unlikely today, 1.3315 will see sellers. Above here, the previous strong support at 1.3335/4 will now act as resistance as will 1.3360 and 1.3400, which looks unlikely to be bothered again for a while.
As we mentioned yesterday, a weekly close below 1.3315 would have quite bearish implications and will be worth watching at Friday's close, and would suggest that 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, but I notice that some major players are calling for an eventual run towards 1.2200 as a distant target.
Economic data highlights will include:
Flash Markit EU Mfg/Services/Composite PMI’s, Flash Markit US Jobless Claims, US Mfg/Services/Composite PMI, Existing Home sale, Philly Fed Mfg Survey
Jim LanglandsFX Charts www.fxcharts.com.au
