EUR/USD: 1.3160The Euro has traded a tight 40 point range today, with the focus being on the Yen , as the US dollar generally held its ground on the back of reports that Republican House Speaker Boehner has made new proposals on the tax issues surrounding the fiscal cliff negotiations. Although there has been no statement following the meeting, the equities markets are in positive mood, with the S+P up 0.85% going into the close.
Elsewhere, the Euro was kept in check by some profit taking on long Eur/Jpy positions but overall the market is beginning to wind down for Christmas and conditions will become increasingly thin. Also capping potential Euro gains today was the ECB president Mario Draghi, warning that 2013 will be tough for Europe, - which is not rocket science, but dampened the positive tone following Fridays rally.
Technically, above today's 1.3186 high, sellers are said to be keen to protect barrier options at 1.3200. Above this though, the next target of note is at the 1 May high at 1.3283, with interim sellers to be found at the minor resistance at 1.3240. Above 1.3280, if we see it, things could begin to accelerate somewhat, and a move towards the 27 March high at 1.3385 and potentially to the 24 Feb high at 1.3486 would seem possible. Don't get too excited - yet!
As we said on the weekend, I don’t think a move of this magnitude is likely in the short term, and probably not this week. The 4 hour oscillators are a little overbought and look as though they may want to roll over, so in the short term it could well be another session of 1.31/1.32, with no data of consequence today to drive it one way or the other. The daily MACDs still have a mildly positive bias, but the RSIs are showing some divergence and the stochastics are beginning to look bit overbought which suggests that, although the Euro should remain generally underpinned for the week, the topside may also be a little restricted, leading us expect some more of the same, possibly staying choppy and rangebound until tomorrow's German IFO data.
On the downside, the immediate support is at today's low (1.3143), below which there should be good support, now at the minor rising trendline at 1.3120, which was previously the 38.2% Fibo resistance of the major move down from 1.4939/1.2042. Below there would see a return to the range with minor bids likely to be seen at 1.3080 and 1.3015, but with the major trendline support to be found down at 1.2960.
Overall, I suspect a 1.31.20/1.3220 day today with the chance of an eventual extension down to around 1.3060, from where we may look to begin a more concerted attack on the topside.
