EUR/USD: 1.2808The Euro climbed to a high of 1.2819 on Monday before retracing to current levels against the Dollar on optimism that Greece will receive its next tranche of aid and on renewed optimism that U.S. lawmakers will reach a deficit-reduction deal by the end of the year, thus avoiding the "fiscal cliff".
EU finance minister meet in Brussels later today where the next tranche of the bailout package for Greece will head the agenda and is expected to be approved, allowing an improvement in risk sentiment throughout the financial markets, with global equities all showing good gains (DAX+1.16%, CAC +1.71%, S+P+1.99%). According to Reuters, the EU will approve the bailout – worth up to €44bn – if it can persuade them that it has met all its demands.
Also helping the tone today is the increased hope, after some positive comments from US law makers, that a deal will get done in the US, allowing progress in the negotiations to avert $600 billion in tax increases which, in turn, would quite likely see the US head into recession.
We are currently sitting at 1.2800, right on the 200DMA and the Euro is looking mildly bid, although the hourly charts are now getting a little overbought and I would be doubtful of too much progress before they unwind themselves. The 4 hour charts are showing the potential for some further strength though, and if we do head a bit higher the points to watch would be at 1.2838 (38.2% of 1.3171/1.2660), followed by the descending trendline, now at 1.2862. Above this, sellers would be found at 1.2900 (50% of 1.3139/1.2660) and then at 1.2954 (61.8%) although it is a little premature to look at this yet.
On the downside, today's session low has been1.2740, a break of which would head towards Fridays low at 1.2690 and then to last week’s base at 1.2660. Below this, would head towards the 100 DMA, now at 1.2637, with the next support at around 1.2607 (50% of 1.2042/1.3171).
For the time being it looks as though dips will meet good demand and a test of slightly higher levels may eventuate, but I don't think we are going too far in either direction and would therefore feel that 1.2760/1.2860 may well cover it, and we are likely to see little directional movement at all until we learn something from the EC meeting, late in the session.
Economic highlights today will include:
EU Economic Fin Min meeting, German PPI
