Regarding trading today, the calendar is very interesting with inflation readings in both EMU (final) and US, but also with interesting activity data from the US, notably the NY Fed manufacturing survey, production and Michigan consumer sentiment. Inflation worries should not ease with EMU March inflation maybe revised higher and US headline inflation moving sharply up, but also core CPI tickling higher, in the US context for markets maybe the most interesting context. Recent eco data have dampened Q1 growth expectations and we are afraid that the confidence indicators that are published will show the indicators are indeed rolling over. Seen from the spectre of central bankers, that would mean hawkishness from the ECB, but neutral to dovishness from the Fed, a euro supportive stance. However, in a broader context that doesn’t necessarily mean the recent highs can be taken out, even if the recent deadlock in the market around EUR/USD 1.45 cannot be prolonged for long. The presentation of the updated Greek austerity plan, including the privatisations, is interesting, but overall it should look okay, at least on paper. The implementation won’t be easy though. However, yesterday’s swift recovery of the euro suggests that it won’t be a risk off day (on euro peripheral problems).
Based on fundamentals and technicals, we still favour a bullish euro strategy. Short term overbought conditions and extreme euro positioning led to some shy (and failed) attempts of profit taking in recent sessions and it might not be over yet. However, the resilience of the euro surprises us. Nevertheless, our buy-on-dips of the pair look still more appropriate than an outright long position at current levels, with 1.4021/00 the major support and entry point. ST investors might still consider profit taking on euro longs, as the psychological 1.45 barrier still holds, hoping to buy again into the pair at lower levels.
The uptrendline at 1.4343 today may be interesting short term. As a weekly close below would suggest a more pronounced correction started.