EUR/USD: 1.3060The Euro has had a remarkably steady session, trading in a 100 point range following the sell-off of the previous NY afternoon, as it struggled to find its feet following the Italian election and the gridlock that looks likely in the coming weeks. Mr Bernanke, in his testimony to Congress defended the benefits of the U.S. central bank's bond-buying program, but which produced little reaction in the Euro, which is a bit of a worry given that it has been unable to take any advantage of any potential US$ weakness that his views might have produced.
Supporting the dollar somewhat though, was the day's data that showed that US Consumer Confidence continues to improve, and in the housing sector, the Case Schiller Index showed that 2012 hose prices were the strongest in 6 years, while New Home Sales spiked by 15.6% in January, much stronger than the expected 4.3%
Technically, the Euro remains vulnerable to further losses, having produced a bearish outside day in the previous session, Given that 1/2 of Italian voters voted against the austerity policies that Mr Monti has been following, which in turn would cast doubt on the collective will of Italy to recover from its debt crisis, reviving the stresses within the EU, the downside eventually looks the most likely direction.
In the short term, the Euro is looking a bit oversold, although yet to really recover from the 1.3017 lows. The pressure therefore looks to be for a move towards, and possibly below 1.3000, albeit in slow and choppy fashion. The dailies have plenty of room on the downside though and eventually I would be looking for a test of the Head & Shoulder objective of 1.2840.
In the shorter term, the 100% correction of the move up to 1.3710 is at 1.2995, and this should prove strong. Below here, there could be a bit of an acceleration, with the next support not really to be found until 1.2905 (76.4% of 1.2671/1.3710) and then more bids should be seen at 1.2875 (7 Dec low).
Rallies should find plenty of sellers, although given the oversold nature of the chart, they could eventually get lucky. The first area of interest, above 1.3100, will be at the session high at 1.3120. Further strength would take the Euro to 1.3140 (minor) and 1.3180 (23.6% of 1.3710/1.3017). I don't think that we are heading above 1.3200 today, but if wrong 1.3240 (minor) and 1.3280 (38.2%) will see offers.
Use 1.3000/1.3100 as a guide again with a preference to using any strength as an opportunity to get set for the next leg lower.
Draghi will be speaking today on the ECB's view of the EU and Bernanke will continue his testimony.
Economic data highlights will include:
Draghi Speech, German Consumer Confidence, EU Consumer Confidence, Business Confidence, US Durable Goods, Pending Home Sales, Bernanke Testimony
