An in-line reading for Euro-zone CPI provided little benefit for the Euro this morning as deflation concerns continue to shadow the region. While there were some positive German economic readings earlier this week and sharply lower energy prices are beneficial to the Euro zone, the slide in crude oil prices seems to have upped the ante on the potential negative slowing impact from Russia. The Euro might rally if the Fed pauses, but that should be a chance to sell into the most significant technical bounce of the last several months. To be on the safe side, traders might consider the purchase of March Euro 1.22 puts for 80 on a rally, looking for a resumption of the downtrend in the Euro over the coming two weeks.
Technical Outlook: The cross over and close above the 40-day moving average indicates the longer-term trend has turned up. Stochastics are at mid-range but trending higher, which should reinforce a move higher if resistance levels are taken out. The market’s close above the 9-day moving average suggests the short-term trend remains positive. Since the close was above the 2nd swing resistance number, the market’s posture is bullish and could see more upside follow-through early in the session. The next upside target is 126.5200. The next area of resistance is around 125.8900 and 126.5200, while 1st support hits today at 124.5300 and below there at 123.8000.