By Fast Brokers – The EUR/USD is bouncing off of intraday lows after nearly hitting 1.22 and the currency pair is undergoing a relief rally, popping back towards it 1.24 as the weekend and a lack of news has allowed austerity fears to subside a bit. The EU was also quiet on the data front today, giving analysts an open window to talk down the extent of last week’s collapse in the Euro. However, despite today’s pop, the EUR/USD is still clearly in a vulnerable position as it tests April 2006 levels. Not much has really changed at this point with investors still clearly negative concerning the state of the EU. The LIBOR is creeping higher and as are interest rates on short-term paper. Markets have shown little faith in the long-term effectiveness of the $1 trillion rescue package as the initial enthusiasm melted quickly after the pop towards 1.31. The EU will light up the data wire tomorrow with the release of ZEW economic sentiment along with CPI. Considering EU data was solid over the past few weeks, if this trend continues the EUR/USD may be able to rise back towards 1.25 and gain back some lost ground. However, a heightened risk remains that an unexpected news story will hit the headlines and dent the Euro. Therefore, investors should be on their toes this week due to unstable conditions.
Technically speaking, the EUR/USD clearly faces an uphill battle with a wealth of downtrend lines hanging over head. Additionally, the EUR/USD faces technical barriers in the form of 5/14 and 5/12 highs along with the psychological 1.25 level. As for the downside, the EUR/USD has a limited near-term support system in the form of intraday and April 2006. Furthermore, the psychological 1.20 should serve as a solid psychological cushion should it be tested.
Present Price: 1.2360
Resistances: 1.2372, 1.2405, 1.2432, 1.2456, 1.2480, 1.2520
Supports: 1.2347, 1.2329, 1.2307, 1.2286, 1.2268, 1.2245
Psychological: May 2010 lows, April 2006 lows, 1.24, 1.25, 1.23, 1.22
(click chart to enlarge)
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