EUR/USD: 1.2740The Euro remains soft today after ECB left interest rates unchanged, as expected, at 0.75%. At the Press Conference, ECB president Draghi remained dovish and warned that "economic activity in the euro area is expected to remain weak," although he noted that confidence has improved since the announcement of the OMT programme to buy the bonds of indebted countries, but that it is up to Spain to ask for assistance if it needs it.
On the other side of the coin, the "fiscal cliff" is a story that is going to be with us for the next couple of months and is going to inhibit any strength in the dollar as the market looks towards the possibility of a US recession in 2013.
So although the Euro made yet another 2 month low at 1.2716 today, the downside progress is very slow and we are now back at the 1.2740 area.
Despite the positive vote from Greece yesterday, there was precious little rally and 1.2780 and 1.2800 remain the first minor levels of resistance. Above this the 200 DMA is at 1.2821, ahead of yesterdays high at 1.2875 and minor downtrend resistance at 1.2900.
The downside has some minor support at today's 1.2716 low and at 1.2695. Below this there is not too much to hold the Euro up , with only the 100 DMA at 1.2634 looking like it may see some bids ahead of the target of somewhere around 1.2610 (50% of 1.2042/1.3171).
The daily momentum is pointing to the lower levels. However as can be seen on the hourly chart below, we have a bit of bullish divergence and I would be wary of getting short too early. I suspect that at some stage we may see a bit of a squeeze towards 1.2850/1.29. If so, it may be that these will prove to be more prudent levels from which to begin looking for an attack on 1.2600.
Hopefully it will be a quiet end to the week, with today's interest being provided by the German CPI, Reuters Michigan Consumer Sentiment Index, and US Wholesale Inventories.
