After yesterday’s huge negative reversal, the Euro saw downside follow-through but found support at the134.00 level and has bounced back well into positive territory this morning. A report that the ECB was consideringnegative deposit rates may not have been a complete surprise to the market given recent comments by theirofficials, but clearly wrong-footed a market that was setting up to hear a dovish tone from the FOMC meetingminutes and triggered a severe meltdown in prices. However, comments by ECB President Draghi that the marketshouldn’t try to “infer” negative deposit rates have given a decent boost to the Euro this morning. Today’s “flash”PMI data showed the usual strength from Germany, but anemic French results are casting a shadow over themarket this morning. The December Euro may find support near the 134.32 level but could see an extendeddownside move if Euro zone data outside of Germany does not see consistent improvement.
Technical Outlook
EUR (DEC): The close below the 60-day moving average is an indication the longer-term trend hasturned down. Momentum studies are trending higher from mid-range, which should support a move higher ifresistance levels are penetrated. A negative signal for trend short-term was given on a close under the 9-barmoving average. The outside day down is somewhat negative. The defensive setup, with the close under the 2ndswing support, could cause some early weakness. The near-term upside target is at 136.3550. The next area ofresistance is around 135.2100 and 136.3550, while 1st support hits today at 133.5300 and below there at132.9950.