EUR/USD: In thin conditions, due to the US holiday, the Euro gained ground on a combination of continued optimism that a deal will get done next week over the Greek bailout package, slightly improved manufacturing PMI data in the EU, (although generally still well below 50), and on good demand at a Spanish bond auction today where demand was stronger than expected.
The Euro, did much as we thought it might yesterday, taking out the stops above 1.2840, spiking up to 1.2870 in Asia and then on to the 50% pivot of the move from 1.3139/1.2660, in Europe after the PMI data, to a high of 1.2898.
Unable to maintain its strength, the Euro is now back at 1.2860 and with the hourlies being a bit overbought and looking as though they want to roll over, a drift back towards 1.2800 would not surprise. I don't think we are going to go too far though as it will again be thin today and it maybe that the charts unwind themselves by a steady drift at current levels.
Further out, the 4 hour charts still have some positive momentum, as do the dailies and thus an eventual retest of todays high would not surprise. 1.2900 will be a bit difficult to overcome, but if we can press on, then we should expect a drive towards 1.2955 (61.8% of 1.3139/1.2660) and possibly on to 1.3025 (76.4%). I don't see this happening today and suspect we are in for a day of 1.2820/1.2900 looking likely to cover it. The only real data of importance today will be the EU GDP which is unlikely to drive the Euro to higher ground, and the German IFO Business Climate Index.
On the downside, we need a return below the previous resistance at 1.2840 to head back to bids at around 1.2800. While looking a bit unlikely to go below there today, further bids would be found at 1.2770 and then at yesterdays low at 1.2735 ahead of the rising trendline support at 1.2725 and last Fridays low at 1.2690.
Today, look for a quiet drift, with the EU GDP being the main focus, but probably a fairly uninspiring session.
