While the Euro is oversold technically, the fundamental condition would seem to leave the bear camp incontrol. Some might even suggest that overnight data from Germany has tempered the negative bias as the Eurohas managed a 30 point recovery. While the Euro could resume its slide in the face of QE talk from the ECB atthe Jackson Hole meeting, a moderate portion of that fresh easing effort might have been factored in by the slideover the last week. While we can’t argue with an extension down to 1.32 in the Euro, we think the washout is nowoverdone and that the ECB might not advertise fresh easing as strongly as the trade hopes.
Technical Outlook: Momentum studies are declining, but have fallen to oversold levels. The market’s shorttermtrend is negative as the close remains below the 9-day moving average. The defensive setup, with the closeunder the 2nd swing support, could cause some early weakness. The next downside target is 132.0925. Somecaution in pressing the downside is warranted with the RSI under 30. The next area of resistance is around132.9950 and 133.4725, while 1st support hits today at 132.3050 and below there at 132.0925.