EUR/USD: 1.2855The markets dollar has not waited to see what the Fed do at the FOMC on Thursday, falling steeply against all currencies today, helped along in no small part by Moody's, who warned that the US AAA credit rating will collapse next year unless Washington takes measures to rein in the government's debt.
The Euro has really seen little pullback since starting its move higher during the US session, after the better than expected US Trade data had initially given the dollar a boost, sending the Euro to its session lows at 1.2770 before turning around, and once it broke the resistance at 1.2840, it moved along quickly to the 1.2870 high.
We will now hang around here until we get the important German Court ruling later today to approve the EU bailout fund (ESM) which will allow the ECB to buy the bonds of the indebted EU member nations. The result of the vote is expected to be positive and would further underpin the Euro, which would possibly propel it towards 1.3000, although this would seem to be largely written into the market price already.
Elsewhere in Europe, Greece has reached a deadlock over the details of its own bailout fund after the Troika only reached partial agreement on details put forward by the Greek coalition government.
We also get the Dutch election today, where the view towards the EU has turned rather sour and the result will be closely watched.
Technically, as I said on the weekend, the break above the 200DMA at 1.2834 has seen a bit of an acceleration and there does not now look to be too much resistance before 1.2973 (16 Feb low). Sellers will undoubtedly be seen at 1.2900 before then, and then again at 1.2928 (61.8% of 1.3483/1.2042).
Care needs to be taken on the topside though. The 4 hour charts are very overbought and the 1 hour charts are showing quite marked divergence following this move higher. I suspect the price action following the court ruling is going to be pretty choppy as the market positions itself for the FOMC on Thursday.
A return to the downside would see bids at the previous resistance, 1.2830/40 and below there at 1.2750 which has so far held the Euro since Fridays move higher. Below this the first Fibo support is at 1.2676 (23.6% of 1.2042/1.2870), but which looks pretty safe for the time being.
Keep stops pretty tight today. I think it will be pretty choppy and the moves could be quite violent, depending on the outcome of the German vote/Dutch Election/Risk Perception/ Greece/FOMC etc.
Right now look for 1.2800/1.2900 to cover it. A break on the topside would tend to suggest 1.2970, but watch out for the divergence building on the charts.
Economic Highlights today will be German CPI, EU IP.
