Although it was able to put together a minor recovery from the 136.50 level, the Euro remains on thedefensive after taking out the highs and lows of the previous 8 sessions in the space of 2 minutes. End-of-yearilliquidity was clearly a factor, but the Euro will still have to contend with the technical damage sustained from anoutside day & week down, a key reversal from a 12-month high, and another failure to sustain a move above the138.00 level. There have been some positive vibes from the region this week, highlighted by progress on bankingreform measures. Recent dovish hints from ECB officials are coming back to haunt the Euro now that Fed hasstarted to taper, however, so upcoming Euro zone data needs to see some definitive improvement in order forprices to find a longer-term floor. The March Euro may be able to bounce back towards the 137.00 level later thismorning, but clearly has its work cut out for it to fully recover from yesterday’s chart damage.
Technical Outlook: A new contract high was made on the rally. Momentum studies trending lower fromoverbought levels is a bearish indicator and would tend to reinforce lower price action. The close below the 9-daymoving average is a negative short-term indicator for trend. A negative signal was given by the outside day down.There could be some early pressure today given the market’s negative setup with the close below the 2nd swingsupport. The next downside objective is 135.5575. The next area of resistance is around 137.8450 and 139.0175,while 1st support hits today at 136.1150 and below there at 135.5575.