As EUR/USD tests 1.2600 they are at least getting one wish in Europe and that’s for a weaker currency. The question is how far the market’s patience is going to stretch before it starts thinking that EU crisis 2.0 is about to happen. The ECB are walking a tightrope and the wind is picking up.

The picture on the monthly chart is looking very scary.and aside from monthly support at the Sep 2012 low of 1.2500 there’s not a lot between here and Jun 2010 support and 200 mma around 1.2200/15

EUR/USD Monthly chart 30 09 2014

EUR/USD Monthly chart 30 09 2014

Although it’s looking very ugly in Europe there are other factors at work right now. US bond yields have bounced and that’s given the dollar a kick and we’ve obviously got end of month/quarter flows to content with too. There’a lot in the mix and a lot of moves to try and decipher.

Short term look to 1.2650/60 to hold resistance on a move back up and then 1.2680, 1.2700. We’ll possibly see some mild resistance forming at 1.2620 if the sellers want to keep the pressure on.