The EURUSD received a boost to new week highs on the German courts decision to make a decision on the country’s role in the EU bailout fund. However, it enters the NY session on weak note as the price has dipped below the days midpoint at 1.27858. The low to high range yesterday totaled 58 pips. Today that range is 64 pips. This is on the low side compared to the 20 day average (94 pips).
The pair spent yesterday forming a bull flag, and on the break it looked promising, but the key resistance at the 200 day MA (at the 1.2832 level) and downside trend line (at 1.2848 today), likely gave traders cause for pause (and profit taking – see daily chart below). Early sellers came in at 1.2818. There is simply too much coming out in the next few days with the German vote tomorrow, followed by the FOMC on Thursday for traders to not lighten up a bit against the levels. Look for stops, however, on a break above this key area (see the daily chart for other topside targets on a break).
On the downside the price has moved back in the channel formed yesterday. The next close target support is the 1.2750/53 area. The bottom trend line comes in at 1.2741. Look for support buyers on the 1st tests of these areas. If the price breaks below this area, trend line support comes in at 1.2703 and the rising 100 hour MA at the 1.2696 will be key targets and tests. If the bulls are to keep in control, staying above the 100 hour MA will be a key clue.
Activity is defensive to the downside so far but there is no clear winner from the bull or bear camp in trading this week.
