EUR/USD: 1.2850It did not take long for the market to lose its enthusiasm for the Cyprus bailout package, particularly after comments from the Dutch Finance Minister, who suggested that the plan that has been put together would form the model for any further needs to resolve bank problems within the EU and that other EU nations may need to re-structure their banking sector. Clever move! Spanish and Italian bank depositors are suddenly very nervous!
To traders, the idea of the EU being allowed to confiscate bank deposits has not gone down well, and following an early rally to the resistance at 1.3047 in Asia on the initial enthusiasm of a positive outcome, the Euro has only headed one way since then and currently sits above today's 4 month low, at 1.2830. Moody's did not help sentiment with a statement that the Cypriot banking sector still remains at the risk of default.
Bernanke was speaking earlier in the day, but had little market effect, as he merely noted the benefits of easy monetary policy. We may get a bit more action from the US today when Durable Goods and Consumer Confidence are due to be released.
Technically, having made a false break above the top of the channel, reaching the Fibo resistance at 1.3047 (1.3045: 23.6% of 1.3710/1.2843) the Euro has turned sharply down to take out the previous 1.2843 low, to trade as low as 1.2829 before a mild bounce. We currently sit just below the 200 DMA (1.2870) which may act as a magnate for the next few sessions and the dailies are yet to suggest that we should be overly bearish down here, although the close back below it will not help sentiment. The 4 hour charts have turned sharply lower though, and I don't think it will be long before 1.2800 comes under pressure. That being the case, I think we can expect a choppy ride down towards 1.2680 (61.8% of 1.2042/1.3710), with mild interim support at 1.2735 and at 1.2700.
On the topside, 1.2900, and then the top of the channel, now at 1.2965 will see sellers ahead of 1.3000. This looks unlikely to be seen today, and overall a session of 1.2830/1.2900 looks to have it covered, with a bias for selling into strength for an eventual test of 1.2800 and lower.
Economic data highlights will include:
US Durable Goods, Consumer Confidence, Case Schiller house price index
