EUR/USD: 1.3000Having traded down to as low as 1.2910 today, the Euro turned around later in the session and headed higher to take out some stops above 1.3000, reaching 1.3031 before drifting a little lower but sitting near the top end of the range.
U.S. jobless claims unexpectedly fell, while the Current Account deficit narrowed in Q4, and combined to give risk sentiment a bit of a lift, sending the dollar a bit lower. Earlier in the session the ECB monthly report showed that the Bank still sees downside risks to the euro zone’s economic outlook and this was partially backed up by EU Employment, which fell slightly more than expected to - 0.3% in Q4 (-0.2%). The EU summit is taking place today/tomorrow to discuss the continuing austerity programme.
Technically the descending channel still holds the cards, although it has to be said that the shorter term indicators are pointing a bit higher and a test of the topside would not surprise. Back above the days highs, - if the channel topside resistance at 1.3060 can be taken out -, then we may have a run towards 1.3097 (23.6% of 1.3710/1.2910). Beyond that, there will be some sellers at 1.3135 although I think it unlikely we get that far today.
On the downside, there will be some buyers again at 1.2950 and then at the session low of 1.2910 should be quite strong (1.2915 =76.4% Fibo support of 1.2660/1.3710). In the medium term we still have plenty of support lined up in the 1.2840/75 area. Below this, 1.2875 (50% of 1.2042/1.3710) lies ahead of the H/S objective at 1.2840, which in turn, is backed up by the 200 DMA at 1.2838. As I have said before I would be buying back some shorts down here.
Stay flexible, as the shorter term charts suggest that the strategy for the day is one of buying dips, while the longer term charts still point to the Euro heading a bit lower, although we are now seeing some divergence appearing on the RSI's so a bit of caution is warranted. It could be another choppy one, with a fair bit of data out later on to provide the direction. Have a good w/e.
Economic data highlights will include:
EU Council meeting, EU CPI, US CPI, NY State Mfg Index, Industrial Production, Rts/Michigan Consumer Sentiment Index
