Retail sales data from Southern Europe keeps coming in and it’s far from inspiring – Spain today, Italy previously. The case for a weaker euro can only be enhanced by this. As I’ve mentioned in recent blogs, we could realistically see some sort of short term EUR/USD bounce before the downtrend reasserts itself. But hold on… we may actually be seeing what constitutes a pause in the trend with the consolidation that’s been in force for the last few days. The key top side levels to watch for are 1.3466 and 1.3485.
Asian equity markets are looking very bullish at the moment, whether you’re looking at the Shanghai Composite, Hang Seng or even the Nikkei, the price action is unashamedly exuberant. Perhaps this is catch up, as these markets lagged Western equity markets for some time. But as I’ve mentioned before, this is most certainly not universally translating into local currency strength. USD/JPY briefly achieved a 102 handle today, and I would look for further attempts to claim and sustain this level over the next few sessions, as the double bottom would indicate.
GBP/USD has been relatively quiet so far. I suspect after the recent washout those who profited from others pain have moved on to better things, and those who capitulated don’t even want to think about the currency pair for a while! 1.6920 is the next key support, the lack of direction in the pair may be an indication that there are still some people getting out of the long trade. If the bullish case is to hold, I wouldn’t expect us to go below that support. We’ll keep an eye out, but my bias for the next impulsive move remains to the topside.
Not much on the data front today as the market is poised for Yellen and co tomorrow. I would expect another session with few decisive moves. This will definitely be a week of two halves!