EUR/USD: 1.2925The Euro has managed to hang on and regain the lost ground following its S+P inspired losses at the NY close yesterday, when the ratings agency downgraded Spain, virtually to junk status. Having dropped to 1.2825 in Asia, the Euro has recovered back to a session high of 1.2950 and ultimately is little changed from this time yesterday, The market is looking on the positive side of the downgrade, feeling that this might at last push Spain towards the long awaited bailout from the EU, which would reduce its borrowing costs and thus, hopefully, promote some economic growth.
Elsewhere today, the ECB released its monthly bulletin with no major surprises, expecting economic growth in the EU to remain weak, with "high uncertainty" weighing on confidence. The downside for the Euro though, was limited by the IMF statement that EU economies such as Greece should be given more time to cut their budget deficits, where the news gets no better, with data today showing that unemployment hit 25%, with the under 25 rate at 55%. US jobless claims showed an improvement today, dropping more than expected to 339k over the week, hitting a 4 year low.
Technically the fall in the Euro, once again tested and held the 200 DMA (1.2822) before regaining its feet. This remains the initial support, above the longer term rising trendline support from the 1.2042 low, now at 1.2815, and above the recent 1.2802 low. A break of this level would suggest further declines to 1.2740 (38.2% of 1.2042/1.3171), which , if seen should prove very strong at the first attempt, but a break would suggest a steeper decline to the low 1.2600 level where 1.2610/40 area would act as a target.
The upside has seen the Euro squeeze to 1.2950 and a break higher would see a move towards 1.2975 (61.8% of 1.3171/1.2825) ahead of 1.3000. Above here would see progress towards the recent 1.3071 high and then to the major long term down trend resistance at 1.3140, which is also 38.2% of 1.4939/1.2042 and should prove very strong.
While the daily charts are still pointing lower, the shorter term charts have some positive momentum and may produce a squeeze back to/above 1.3000. Ultimately I don't think we are going too far from current levels and 1.2880/1.3000 may cover it going into he weekend.
Today sees the US PPI data and the Rats/Michigan consumer sentiment index..
