EUR/USD: 1.2285
The Euro soared today on comments from ECB head, Mario Draghi, after he said that the ECB were prepared to do whatever it takes to save the Euro. That was all it took for the shorts to scramble for cover and having done little for much of the session, the Euro rocketed from 1.2115 to the day's high of 1.2328 in pretty short order.
Now though, they need to follow this up with some concrete action or this rally may turn into a short lived affair as there was precious little of real substance to his comments. We wont have to wait long to find out, and the ECB meeting next Thursday will be looked forward to with great interest, to see exactly what he intends to do to back up the rhetoriC.
The news did the right thing for the day though and sent Spanish yields back below 7%. Equities have had a big day out too, with the DAX +2.67%, EStoxx50 +4.13%, and the S+P has just finished up 1.7%.
Technically we have come to rest perfectly at the Fibo resistance at 1.2323 of the move down from 1.3282/1.2042 and have, so far, retreated mildly from there. For the time being the 4 hour charts look as though they have plenty of momentum behind them to move higher but we are not going anywhere too far in the next few hours, which will allow the hourly charts to unwind. It will not be until we either get some follow up from Draghi or possibly from the US GDP data, that gives further hope to QE3 and therefore to risk sentiment, that will see the Euro head for the higher ground.
On the topside, above today's high,(1.2328), the first level to watch would be 1.2362 (50% pivot of 1.2692/1.2042) and then 1.2438 (61.8%). Above here we are back towards the 1.2520 area which acted as a magnet between May and early July. It may be that we do make a return visit up here, but as yet it is too early for it to be a realistic target.
The downside has minor support at 1.2260, and this could well support it through Asia. Below this, 1.2220 (38.2% of 1.2042/1.2328) and then 1.2185 (50% pivot) will act as interim support. I think it will be a while before we see it back below 1.2150, but obviously the next negative EU headline is never far away. In the meantime we await today's German CPI and US GDP data and much more importantly, the Olympics, so let's hope for a quiet 2 weeks! Doubtful!
