EUR/USD: 1.2935The Euro and Equity markets recovered somewhat today as concerns eased a little, after the Cypriot parliament voted against the bailout package, with the ECB now working on an alternative bailout plan and have said that in the short term they will continue to provide liquidity to Cyprus' banks. The data today had little effect on markets, with the January EU Current Account coming in at EUR+14.8 bio (against EUR +16 bio in Dec), although the German bond auction saw very good demand as investors sought a safe haven venue from the latest round of EU concerns. EUR 3.36 billion of 10-year securities sold at an average yield of 1.36 %, the lowest auction price since last July.
The FOMC decision, at which Bernanke played down the Cyprus issue, but promised to keep the printing presses rolling to pump liquidity into the system has had little overall effect.
Technically the Euro has behaved pretty much as we hoped, and having reached the technical level that we have been watching over the last few weeks, it has stabilized and managed to squeeze back towards 1.3000.(high 1.2977).
There are strong offers lined up in the 1.2990-00 area, although the 4 hour indicators do suggest that these may be tested during the coming session and if taken out , the Euro would head towards the top of the channel (1.3025) and then to the Fib resistance at 1.3044 (23.6% of 1.3710/1.2844). Beyond here would suggest 1.3075, which would allow the gap to Fridays close to be filled.
A turn lower would head back below 1.2900, towards the 200 DMA at 1.2965, ahead of yesterday's lows at 1.2844. Below this would see an acceleration to levels below 1.2800, with little support be found ahead of 1.2680 (61.8% of 1.2042/1.3710), although not today - unless Cyprus disintegrates completely!
Look for 1.2920 to hold the base today with a move towards 1.3000 and possibly higher to fill the chart gap. There is a fair bit of data out later in the session, headed by the PMI's, so stay flexible.
Economic data highlights will include:
EU Flash Mfg/Services PMI’s, US Flash Mfg PMI, Existing Home Sales, Phil Fed Mfg Survey
