Despite the generally soft EU services PMI’s, position squaring ahead of today’s ECB meeting underpinned the Euro today. It was assisted by a bit of a short squeeze after news of a ceasefire in the Ukraine, although some doubts have since emerged as to the details of this, but the pair ran into sellers at 1.3160 causing the Euro to drift back to close the US session at around 1.3140.
We now wait to see whether Mario Draghi announces any form of easing of monetary policy today. He is generally not expected to pull the trigger despite what he said at Jackson Hole two weeks ago, but a surprise cannot be ruled out and if he does ease, then the Euros bear trend should resume.
The other focus will be on the US ADP Jobs numbers (exp +220K) which comes ahead of tomorrow’s employment/NFP, and the US ISM Non Mfg data (exp 57.5).
Technically there is little real change to the Euro today, which for now, looks set to remain underpinned while the 4 hour charts continue to unwind their oversold condition.
A break above the session high, would again run into good sellers which may cap further advances and where short term resistance lies at 1.3170 (200 HMA). A break of this would see a run towards 1.3200 above which would then take the Euro back to the Fibo resistance at 1.3225 (38.2% of 1.3411/1.3118). Beyond this would trigger stops, possibly taking the Euro back up to the top of the channel at Fibo resistance (61.8% of 1.3411/1.3118) at around 1.3300.
The downside levels remain the same. The Euro, although a little firmer, remains close to the base of the channel, after having based yesterday at 1.3110, with more substantial support seen at 1.3104 (6 Sept ’13 low). A break of 1.3100 would most likely see the Euro accelerate lower towards 1.3045(76.4% of 1.2754/ 1.3993), which if seen should prove strong support. A break of this would then suggest a run towards 1.3000, which will also be heavily protected, but a break of which will open up the possibility of a decline towards the major Fibo extension, this being the 161.8% projection of 1.3993 to 1.3502, from 1.3700 at 1.2906 and then beyond that to the 9 July low 2013 at 1.2754.
It appears that nothing is going to change today as far as the ECB is concerned, which would cause a squeeze higher as short covering becomes the name of the game. However given the ongoing soft data coming out of the EU, Draghi is going to have to act sooner or later and I still suspect that any rally towards 1.3300, should we see one is a sell opportunity.
Economic data highlights will include:
German factory Orders, ECB IR Decision/Press statement, US ADP Employment Change, Jobless Claims, Trade balance, ISM Non Manufacturing PMI.