EUR/USD: 1.3100The US Dollar generally weakened a little today, as negotiations over how to avoid the "fiscal cliff" continue without any apparent progress, and with the Euro reaching a high of 1.3106.
The Euro received added assistance from Greece (a first!), where optimism over the deal for Greece to buy back its debt at better than previously expected rates and thus to continue to receive aid from the EU and avoid an eventual default, generally underpinned it all day.
From a technical perspective, we are not too far from the level that we mentioned yesterday, of 1.3083, that was out initial upside target. The Euro may continue to grind higher with 1.3139 (17 Oct high) not too far away, although I would continue to raise the trailing stop losses, given the divergence to be found on the 4 hour charts, that hint of a possible correction towards 1.3000 and possibly lower.
If the Euro does keep climbing higher, above 1.3139 would see a move towards 1.3171 (17 Sept high) and then to 1.3200 and above, where it all comes a bit congested.and progress, if seen, looks likely to be slow.
If we see a correction,1.3075 and then 1.3045 would offer minor support ahead of 1.3003 (23.6% of 1.2660/1.3106) and then 1.2937 (38.2 %), which given the recent tight price action, looks unlikely today.
One thing to note is that the Dollar Index, (DXY: 79.67 - see weekend update) having broken back below 80.00 is now fast approaching the 200WMA at 79.56. This should prove strong support for the dollar and may well slow down, for the time being at least, any further progress for the Euro.
Overall, I suspect that the Euro's slow drift higher is going to continue, but at some stage we will get the correction lower, so make sure that the stops stay in place for what looks like another slow session ahead, and with the market looking as though it has one eye on tomorrow's ECB rate decision and on Fridays NFP/US employment data.
Ahead of that, today's economic data highlights will include:
EU Composite, Services PMI (Nov), retail sales, US ADP employment, Factory Orders, ISM Non- Mfg PMI
