To end the week the Euro Dollar showed some incredible moves. Early in the session, it looked as if it was going to be a pretty quiet end of the week. There were few economic reports due both in Europe and the US, but nothing terribly exciting.
During the morning session, the pair moved up and down near 1.30 number, which is that all important point of support.
The dollar came under pressure at the time, market rumors spread that EMU officials were preparing steps to raise the amount available for EU rescue fund.
The euro might also have received some support from a rise in core European bond yields at that time.
The US data were close to expectations.
Throughout the day the USD slowly march upwards, it finally trigger a USD profit taking move.
The CPI was reported exactly in line with expectations at 2.9 Y/Y. Worries about inflation and the lack of necessity for any additional monetary easement became the prime focus.
This futile divergence was used to kick start a first wave of USD selling.
Mid-morning in the US, the Michigan consumer confidence was also marginally weaker than expected and caused a similar reaction as was the case for the CPI. The EUR/USD cross rate came close to the week high at 1.3191, but a break didn't occur.
The price moves in the currency market were much stronger than other markets, suggesting that it was driven by profit taking in a market that had become too long dollar. The pair closed the session at 1.31, compared to 1.3080 on Thursday evening.
Today, the calendar is again void of data and uninspiring in Europe and the US.
In the US, the NAHB housing market index will be released.
Later the week, the focus will be on the US housing data, the EMU PMI's and Bernanke will speak several times. Markets will look out whether the Fed president will give any hints on US monetary policy, but we assume that the Fed won't signal a change in tactics yet.
In Europe, investors will interpret whether or not the decline in the February PMI's was a one-off. After all, the calendar is thin this week, leaving global market sentiment and technical considerations set the tone for trading today and perhaps the rest of the week.
After the sharp correction at the end of last week, the question is whether the USD-correction has run its course. The pair is holding within striking distance of the 1.3191 level. Breaking this level would suggest that the dollar rally has halted short term. On the other hand falling below the 1.30 level seems a possibility as the debt crisis might once again become the center of attention.
EUR/USD Pivot Points (Time Frame: 1 Day)
Name S3 S2 S1 Pivot R1 R2 R3