EUR/USD: 1.3015Poor Consumer Sentiment from the EU today fed expectations of a potential ECB rate cut, the likelihood of a dovish tone from Mr Monti at the Press Conference on Thursday, and kept pressure on the Euro. This came on top of the deadlock on the political situation in Italy which has given rise to the chances of another election sooner rather than later.
While the Euro does look soft, it has held on above last Friday's lows and has spent the session not too far from 1.3000, although it looks mildly bid going into the NY close, and technically little has changed.
On the topside today's high has been 1.3030 and given the nearby descending trendline, if we go above this, we may now see a bit more of a short squeeze that would take us up to 1.3070. Above here, the 100 DMA is at 1.3120, while the top of the channel is now at 1.3240. In the short term the 4 hour charts are showing some mild bullish divergence, which should give us better levels to sell into, in looking for the greater move to the downside towards the medium term Head/Shoulder objective at 1.2840, and so a return towards 1.3100 would not surprise before we head lower.
On the downside, below today's low would find bids at Fridays base at 1.2965. The channel base is now at 1.2908, which ties in with the 76.4% Fibo support of 1.2660/1.3710. Below this lies 1.2875 (50% of 1.2042/1.3710) ahead of the H/S objective at 1.2840 which is backed up by the 200 DMA at 1.2830 (purple line), so the support in the 1.2830/75 area is going to be strong and would suggest a good area to buy back some shorts.
Today looks to me as though we could see a bit of a repeat of yesterday, although the short term charts do have some mild positive momentum and a move up towards 1.3070/1.3100 would not surprise before another attempt at lower levels. Use 1.2970/1.3070 as a guide.
Economic data highlights will include:
T: EU Services PMI, Retail Sales, US ISM Non Mfg PMI.
