EUR/USD: 102905The Euro is pretty much unchanged today after gyrating between 1.2840/1.2933 ahead of Bernanke's testimony later in today's session. The focus today has been on the Feds Bullard, who caused some mild weakness in the dollar by stating that QE should continue, and should be altered only according to the strength, or otherwise, of the data at the time of release. The market took this as a hint that Bernanke will maintain the status quo and that will mean further dollar weakness and more upside for the equity markets. Since Bullard spoke, so has another Fed member, Dudley, who has said he cannot predict the next move in QE, which has seen the $ regain some mild strength, but ultimately going nowhere fast into the NY close.
Until Bernanke we can probably expect very little to happen and I don't think it is going very far from 1.2900. After that, anything could happen, but the 4 hour charts are pointing quite strongly higher and it may be that we see a squeeze to the topside, and above today's session high, initial resistance is to be seen at 1.2945 (38.2% of 1.3193/1.2795) and then at 1.2990, which will be strong, given that this is where the 200/55DMAs have crossed, as well as being the 50% pivot of 1.3193/1.2795. A break above 1.3000 would see acceleration towards 1.3040 (61.8%), and then towards the downtrend resistance, currently at around 1.3100, which is also 38.2% of 1.3710/1.2796.
If Bernanke goes the other way and calls for a tapering QE, we can expect the dollar to make a turn higher again and would see a return to the day's low at 1.2840. Below that ,we see a drop towards the support at 1.2800, below which would see a move into the very strong 1.2740/70 area.
It looks to me as though we should continue to trade the Euro from the long side for the time being, but it all depends on the events later in the day. Until then sit on your hands as trade will be pretty cautious.
In the more medium term, I still suspect that looking to sell the Euro into strength, preferably at levels above 1.3000 is the way to go, looking for an eventual drop to test the 1.2770/40 area, and eventually a fair bit lower.
Economic data highlights will include:
EU Council Meeting, Current Account, Bernanke Testimony, FOMC Minutes.
