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.
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