EUR/USD Bounces to Start Week

By Fast Brokers – The EUR/USD had a poor finish on Friday, sinking back towards 1.2250 after news hit that Fitch is downgrading Span’s debt.  However, the losses were contained compared to what we’ve seen previously as the EUR/USD managed to stay well above previous May lows.  In fact, it seems the EUR/USD is making an effort to form a bottom.  However, intense psychological headwinds are still circling and it remains to be seen just how long these May bottoms can hold if the EUR/USD doesn’t piece together some more consistent upward momentum.  That being said, investors should keep their eyes on the news wire per usual.  We’re in a fluid situation and there’s a high probability that more news with a considerable weight will hit the wire again this week.  However, even if the news wire is quiet we’ve got plenty of events on tap, highlighted by an RBA rate decision and U.S. employment data.  Hence, even though the EU data wire will be relatively quiet this week investors should still be prepared for volatility.  Trichet will address the public today and investors will receive EU M3 money supply.  The U.S. will have a banking holiday, meaning trading could be choppy today.  Though activity should pick up during tomorrow’s Asia trading session with Chinese manufacturing PMI on deck along with a host of Australian data followed by the RBA’s rate decision.

Technically speaking, the EUR/USD seems to be getting comfortable in a trading range between 1.25 and May lows.  Meanwhile, the EUR/USD faces multiple downtrend lines along with intraday and 5/28 highs.  As for the downside, the EUR/USD has technical cushions in the form of intraday and 5/27 lows.  Furthermore, the psychological 1.20 level should serve as a strong technical support should it be tested.

Present Price: 1.2320
Resistances: 1.2341, 1.2369, 1.2386, 1.2412, 1.2436, 1.2456
Supports:   1.2304, 1.2280, 1.2268, 1.2234, 1.2208, 1.2191
Psychological: May 2010 highs and lows, March 2006 lows, 1.24, 1.25, 1.20

(click chart to enlarge)

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