An abrupt change in tone from the region’s economic data has put the Euro squarely on the defensive latethis week, although the market has been able to find its footing before retesting critical support just below the135.00 level. While record-high Unemployment has generated plenty of negative headlines, it may be the sharpdrop with inflation that is doing more damage to the Euro as it has raised the potential for fresh ECB rate cuts atnext week’s meeting. There have been no major Euro zone data points this morning to potentially improvesentiment, so the Euro may be in need of weak US numbers later this morning in order to put the brakes on thisweek’s fairly sizable downdraft. The December Euro may find near-term support around the 135.12 area later thismorning, and is unlikely to avoid a huge weekly loss without finding a fresh source of support at home to offsetyesterday’s poor Euro zone data results.
Technical Outlook
EUR (DEC): Momentum studies trending lower at mid-range should accelerate a move lower ifsupport levels are taken out. The intermediate trend has turned down with the cross over back below the 18-daymoving average. The close below the 2nd swing support number puts the market on the defensive. The nextdownside objective is now at 134.5750. The next area of resistance is around 136.6700 and 137.8550, while 1stsupport hits today at 135.0300 and below there at 134.5750.