The short covering bounce in the Euro has brought the currency within striking distance of a potential technical trend altering test of the 50 day moving average which sits up at 1.2550. A rise in volume and open interest on the recent attempt to rally suggests that the Euro is showing signs that the trend might indeed be shifting to the upside. In order to shift the tide fundamentally in favor of the Euro probably requires some positive Euro zone data or a series of soft US scheduled data points from a full slate of US data later this morning. Perhaps the Euro is seeing some support from Bundesbank comments overnight that seemed to increase the prospect of ECB QE ahead and that has prompted some shorts to exit the Euro. The Commitments of Traders Futures and Options report as of December 9th for the Euro showed the Non-Commercial and Non-reportable combined traders held a net short position of 191,984 contracts. Therefore the prospect of a significant short covering rally should not be discounted, especially if the March Euro manages to regain a critical chart resistance point up at 1.2504.
Technical Outlook: Momentum studies are rising from mid-range, which could accelerate a move higher if resistance levels are penetrated. The market now above the 18-day moving average suggests the intermediateterm trend has turned up. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The next upside objective is 125.5450. The next area of resistance is around 125.1399 and 125.5450, while 1st support hits today at 124.1200 and below there at 123.5050.