The EURUSD has had a wild ride in the London morning session as the German constitutional court cleared the way for the ratification of the EUs bailout fund with conditions. The condition being a cap of $246 billion on German liabilities but that could be increased with legislation approval. The yield on 10 year Spanish and Italian bonds are down at the lowest level since end of March/early April (see chart). Later today at 8:30 AM, the US Import Price Index will be released as will Wholesale Inventories with both not usually a market mover. At 1 PM Apple unveils its newest Iphone 5. The FOMC starts their 2-day meeting today with the decision tomorrow at 12:30 PM where the Fed is expected to announce a new round of QE. They will also give their newest projections on GDP, inflation and employment at 2 PM. Bernanke has a press conference at 2:15 PM.
From a technical perspective, the price on the announcement volatility, moved briefly below the broken trend line off the highs in 2012 at 1.2842, and the 200 day MA at the 1.2830 (moving to a low of 1.2815 – see daily chart), but the price quickly rebounded to new highs. The price move higher did reach it’s next key target at the 61.8% retracement of the 2012 trading range at the 1.2933 (high reached 1.29357 – see projection from yesterday’s post). Traders took profit at the level and the price has rotated back lower in early NY trade.
Currently, the price is testing the 1.2900 level as NY enters. The 38.2% of the days range comes in at 1.28899 and the 100 bar MA on the 5 minute chart comes in at 1.2883 currently (blue line in the chart below). Look for support against this area. A break below the days midpoint at 1.28757 would be a concern for the some longs and there may be some reevaluation of the trade with likely a period of consolidation as the market digests the developments.
Ultimately, if the price is able to stay above the 200 day MA (at 1.2830), the bias remains positive. The burden is still on the sellers to take back some control by taking the price below the support levels. 1.2875-83 will be the first test today. If they can’t move the price below this support level, the price is likely to rotate higher with the 61.8% level (1.2933 on daily) remaining next key topside resistance. I would expect seller on moves toward it today as the market prepares for the FOMC decision tomorrow.
