AUD/USD: 0.9135EUR/USD: 1.2865The Euro is a little higher today, underpinned by softer US Treasury yields which have dragged the dollar a bit lower. There was also some positive news from Greece, where the Troika reported that the economic outlook remains broadly in line with their projections, and that agreement seems to have been reached on public sector staffing levels that are required in order to have access to further bailout funds. In Portugal, political tension eased after the leader of the junior coalition party was bought closer to leadership, to become responsible for economic policy coordination with Troika, after having offered his resignation last week.
Further gains for the Euro were hindered somewhat by the softer data where the EU Sentix fell to 12.6 (exp -10.0) from -11.6 in June, weaker than -10.0 median forecast, while German May industrial production was also weaker than expected at -1.0% mm, ( exp -0.5%).
The Euro, having held on to 1.2800, has had a pretty quiet session in rallying from the session low of 1.2810 to the high of 1.2877, which is the 50% pivot of 1.2042/1.3710. It currently sits just about at the highs and the short term indicators look as though there is room for a further squeeze, possibly to the top of the channel that appears to be building, where the resistance is currently at 1.2940, previously also 76.4% Fibo support of the 1.3415/1.2805. Above this is further Fibo resistance at 1.2950 (23.6% of 1.3415/1.2810) so breaking above here may prove tricky, but it is feasible that we could progress on towards 1.3000. I don,t think so at this stage.
On the downside, the support in the 1.2800 area is very strong and looks likely to stay intact, at least for the coming session. A break below the 17 May low at 1.2796 would suggest a decline towards the 4 April low at 1.2744 below which there is little to hold it before 1.2680 (61.8% of 1.2042/1.3710), which should also be strong. Beneath here would find further bids at 1.2660 (13 Nov low) below which the real acceleration could begin as we head to 1.2586 (Aug 2010 low) and then 1.2435 (76.4% of 1.2042/1.3710).
There is little to no data of major importance out of either the EU or the US today so it could all be rather quiet and I suspect a session of 1.2840/1.2940 may be in store, with a mild preference on the day of buying dips, while medium term traders may want to hang off in looking to sell rallies in preparation for the greater downtrend that I think will eventually resume.
Until the FOMC minutes, late on Wednesday, we may be going nowhere fast, although China does release its CPI data today and in the absence of any other leads, the market may seek some guidance from this.
