EURUSD; Euro buffeted by SNB move. EZ/US CPI to provide the direction today by FX Charts

Then news that the SNB had removed the 1.2000 floor in EurChf dominated overnight trade, with the cross collapsing from just above 1.2000,  falling in a black hole by around 20% to 1.0053 on MT4 (although EBS apparently registered the cross as trading at 0.8500!!) before rebounding back to around 1.0400, with price action remaining highly volatile for the rest of the session. Perhaps the SNB know something that we don’t with regards to the ECB’s thinking at next weeks meeting and realise that it will be pointless to defend the peg in the event that the ECB do introduce QE. For its part the Euro dived from around 1.7770 straight down to 1.1567 before an equally swift bounce back to 1.1770 and then settling for a while at around 1.1700 before eventually heading back towards the lows and then settling at 1.1625.Elsewhere the day’s data was more or less lost in passing, but the for the record, the US Empire State Mfg index improved to 9.95 in January, while the PPI fell by  -0.3% mom, but rose 1.1% yy in December. Initial jobless claims rose to 316k, much higher than expectation of 299k.

Today’s focus will be on the inflation data from the EU/Germany and then later from the US. (Exp EU: -0.1% mm Dec, 0.8%yy,  Germany  0.0%mm, 0.2%yy, US 0.1%mm, 1.7% yy). A soft EZ reading will add further pressure on the ECB and will not help the Euro.

Technically, we now have new trend lows at 1.1567 as we head towards 1.100 and eventually lower. The 2005 base at 1.1640 has now been taken out, and below today’s low the next realistic support is at 1.1370 (Nov 2003 low) and then the major Fibo support at 1.1227 (61.8% of 0.8225/1.6037), with precious little elsewhere to hold it up. In the short term, the hourlies are very oversold and it maybe that for the coming session we are going to gyrate above the session lows in order to allow the charts to unwind, but eventually I think we have a long way to go on the downside.

Back above the 2005-1.1640 level, rallies could see the Euro retest 1.1700 above which the breakdown area at 1.1770 will attract, where the Euro was sitting when the SNB got involved. Above here looks unlikely today unless we get a strong EU/weak US CPI combination. This would be doubtful, but if wrong, then further gains would head to 1.1800 and 1.1860.

It is going to be another volatile session, so tread carefully, but overall the weak Euro scenario is likely to persist.

Economic data highlights will include:

German/EU CPI, US CPI, Capacity Utilisation, Industrial Production, R/M Consumer Sentiment Index.