EUR/USD: 1.2540The Euro did more than I would have expected yesterday given the thin market conditions because of holidays in Europe and in the US. After opening slightly higher in Asia and moving up to meet the sellers at 1.2620, it then drifted lower again, to finish at levels not too far away from Fridays close.
Aside from the news on the Greek election polls that caused the blip higher in the Euro, the headlines from Europe have not improved, particularly from Spain, where a jump in 10 Year bond Yields to 6.5%, again helped to cap the Euro. The IBEX was about 2% lower today.
Technically the session has allowed the charts to mildly unravel their oversold nature squeezing a few of the shorts out of their positions in the process. Given that the market is overwhelmingly short, according to the latest figures from the IMM, rallies are inevitable and if we do actually get some positive news, we could see the Euro spike quite sharply higher. Until the Greek election, I don't think we should expect too much, directionally, but if the result,- still 3 weeks away - were to give a mandate to the pro bailout conservatives, as the polls are suggesting, then the Euro may yet find that it has legs.
Today we have met the minimum upside target at 1.2623, -the previous support - and we need to overcome this level in order to proceed towards the trendline resistance, currently at 1.2650, and then the first Fibo resistance at 1.2680 (23.6% of 1.3282/1.2495). There are plenty of stops above 1.2625, so if we do ever get there, the upside momentum may be self fulfilling.
To the downside, 1.2500 still holds and a break below this would see progress to 61.8% of 1.4246 to 1.2625 from 1.3486 at 1.2484. There then lie layers of minor support, beginning at 1.2460, 1.2430 and 1.2400, all the way down to 1.2325. I suspect progress to the downside, if we see it, is likely to slow down a little, given that the daily MACDs are approaching oversold status and we therefore could well be in for some consolidation around current levels.
Today, look for more in the 1.25/1.26 range as an initial guide.
German CPI, US Case Schiller Home Price Index and Consumer Confidence to provide the leads today.
