The EURUSD has surged on the Draghi comments that they will do “all they can”. Yields on Spanish and Italian bonds are down (expecting another round of LTRO?) sharply. Italian 10 years are at 6.088 vs 6.445% yesterday and Spanish 10 years are at 7.10% vs 7.376% yesterday.
The EURUSD has moved all the way back to the June 1 low (remember that old level) at the 1.2286 level. The 38.2% of the move down from the June 29th high to the low reached just Tuesday also comes in near that level at 1.22896. These resistance targets have stalled the price move for the time being (high reached 1.22859).
On the way the price has moved firmly back into the 10 day range that stymied the market from July 6th to July 20. That range totaled172 pips and involved a number of up and down moves. We are back in it.
The hourly chart below outlines what were levels of support/resistance during that 10 day action (yellow areas). As mentioned the price has found willing sellers against the June 1 low at 1.2286. The price has rotated back lower in early NY trade and looks toward the next area of support at the 1.2246-55 area. Holding the level would be an indication of buyers and should lead to another test of the highs.
On a move below this level, the next downside corrective target would be the 1.2221 level. This is the 38.2% of the surge higher today (see 5 minute chart below). The midpoint of the same move comes in at 1.2201 (see below). I would expect buying against the level as the “caught shorts” will likely feel relief to get out and regroup at the corrective level (a move back below this level will muddy the water).
For the time being though, the bulls have firm control. The range for the day is lumpy at 171 pips (20 day average of 111) but a break of that June 1 low/38.2% retracement at the 1.2286 area would likely trigger additional stops.
The next targets above would look toward the July 18 high at 1.2306, the July 17 high of 1.2316, the July 19 high of 1.2322 and the July 10 high of 1.23335. Moves through these levels takes us out of the 10 day range and opens the door wide open to the upside.
