While the troubles of BES have been contained overnight the September Euro sits right on top of criticalsupport on the charts at 1.3600. While the banking troubles might be put on hold, this week’s data flows from theEuro zone have been discouraging, particularly from the pivotal German economy. Therefore the trade might beable to garner some initial support from news of a modest increase in German June CPI results as a positivereading this morning, countervails deflationary talk. Critical uptrend channel support is seen at 1.3596 but wethink the Euro is destined to forge a fresh downside breakout in the coming trading sessions. Secondary supportand a near term targeting is seen down at quasi-double bottom low of 1.3579.
Technical Outlook: The major trend has turned down with the cross over back below the 40-day movingaverage. Stochastics trending lower at midrange will tend to reinforce a move lower especially if support levelsare taken out. The market back below the 18-day moving average suggests the intermediate-term trend could beturning down. The daily closing price reversal down is a negative indicator for prices. The market setup issomewhat negative with the close under the 1st swing support. The next downside target is 135.5500. The nextarea of resistance is around 136.4199 and 136.7900, while 1st support hits today at 135.8000 and below there at135.5500.