EUR/USD: The Euro remained largely in consolidative mode today, holding the 1.3360 support, assisted by comments from ECB member Jens Weidmann who dismissed concerns about the recent strength in the Euro, which caused a sharp jump from 1.3380 to the day's highs at 1.3426. With the market now focused largely on the upcoming G20 meeting and the talk of "currency wars" , it will be political statements that continue to drive the moves in the Euro.
French officials got the ball rolling today, suggesting that the G20 should discuss the recent strength of the euro although, as was the case last week, Germany has poured water on this idea.
Trade today was pretty much as we thought it might be, in holding the 1.3360 support and rallying mildly, reaching 1.3426, but with further upside limited by the ongoing concerns of political tensions in Spain and Italy and also over the terms of Cyprus' bailout, which will be discussed at the G20 meeting. I would doubt that we are going anywhere too far in either direction before it takes place unless the US retail sales (Wed) or the EU GDP (Thur) spring a major surprise.
Technically, it would seem that the consolidation could continue for the next day or two. Thursday's Q4 EU GDP will probably further limit any upside for the Euro, while at the same time the downside looks as though it will remain supported at the bottom end of the range, with good bids to be found below today's lows and helped along by the mildly rising positive momentum in the 4 hour charts.
On the topside, the first resistance above the session highs will be 1.3435 (23.6% of 1.3710/1.3353) and then at 1.3487 (38.2%), where the descending trendline currently sits. Above this would see a further squeeze towards 1.3500/20, although I would be a little doubtful of seeing this today.
On the downside, below today's lows which will see bids at around 1.3360, buyers should appear at 1.3315 (23.6% of 1.2042/1.3710) and below that there is minor support at 1.3280 and again at the minor rising trendline at 1.3260 (chart below). Under here we head towards 1.3170 and then to 1.3135. I don’t think we are likely to see anything of this magnitude in the next few days and would be surprised, – if we do head lower, – to see it much under 1.3250. If wrong, the major support is at around 1.3070 (38.2% of 1.2042/1.3710.), which if seen should be very strong.
There is little Economic data out today of importance and another day of trade between 1.3360 and 1.3450 would not surprise.
