Today has the potential to be busy, with the action initially coming via the German GDP (exp 0.3% qq), the IFO (exp: 103.1/ Expectations; 108.3/Climate; 113.6/Current) and the US CPI (exp 0.0% yy; 1.7% Ex-Food/Energy). The CPI will be the main economic focus of the day, but there will also be two speeches by Mario Draghi and one also from Janet Yellen, talking on the US economic outlook, meaning good potential to see some serious moves, in either/both directions. Keep stops in place! Monday is a US holiday (Memorial Day), so liquidity will be thin late in the session.
The points to watch remain pretty much intact. On the topside, the 100 DMA, now at 1.1155 will provide the initial resistance ahead of the 1.1180 session high. Above this could see a return towards 1.1200 and 1.1215 both of which will see good sellers, but beyond which could take the Euro back towards the 200 HMA which currently sits at 1.1260.
Back below 1.1100, the 55 day MA (1.1090) will again provide some support ahead of today’s 1.1080 low and the previous session low at 1.1061, where the rising trend support also now lies. This area of support should be quite strong, but a break of which could take the Euro to 1.1000 and to 1.0965 (50% of 1.0461/1.1466) quite quickly. Below this would see a sharp move towards 1.0840/70 but could be a stretch too far for now.
As with yesterday, with the dailies rolling over, the preference is to trade from the short side, selling into strength. The 4 hour charts look mildly positive, so leave room for added volatility today and look to sell in the 1.1200/60 area, with stops on shorts placed just above 1.1300. If the US CPI is strong, then don’t worry about any rally, as we would then most likely be in for a quick move to 1.1000 and possibly lower. On the other hand, a dovish JY could put any potential dollar rally into a quick reverse, so tread carefully!
Economic data highlights will include:
German GDP, IFO, Mario Draghi Speech x 2, US CPI, Janet Yellen Speech..
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