EUR/USD: 1.2200
The Euro has continued to decline on concerns about global economic growth, making yet another 2 year low at 1.2166, following the ECB monthly report that growth and confidence in the EU is weak and uncertain. It was generally a pretty quiet news night and today we await the China GDP data where, if the reading is 7.6% for Q2, as is expected, it would be the lowest since the financial crisis in 2008 and would do little to encourage the markets.
The lack of any global growth is showing though in the equity markets where the S+P closed lower for the 7th day in a row, -0.5% to 1.334. The DAX fell 0.53% and the CAC -0.7%.
Technically the Euro is slowly ratcheting its way lower towards the target of 1.1875, but it looks as though the move will take a while and with the 1 and 4 hour charts showing increasing divergence, the chances of a bounce are growing.
Below today’s low, the immediate target is 1.2133, 61.8% projection of 1.3282 to 1.2284 from the peak at 1.2747. This level also acts as 50 % of the major move higher from 0.8211/1.6033 and should be quite strong on the first attempt. A break below this would see a decline to 1.2100 minor support and then to 1.2000 which should act as a psychological level and where there should be plenty of bids protecting barrier options.
On the topside, today’s high at 1.2247 and then the previous days tops at 1.2296 and 1.2334 will see short term resistance . The first Fibo levels to watch are at 1.2288 and 1.2365 (23.6% and 38.2% of 1.2692/1.2166).
Although I have little doubt that we are headed lower over time, I suspect that a degree of caution is warranted at these levels and indeed if the support at 1.2135 area is as strong as I suspect it should be, the short term risk/reward is probably to the upside, if only to allow the charts to unwind.
China aside, there is little else out today, with the Rts/Michigan Consumer sentiment survey providing the economic highlight. Being Friday 13th, I would be leaning to sitting on the sidelines to allow the markets to do the work. It could be a messy day!
Use 1.2165/1.2265 as an initial guide. Good luck and good w/e!
