Like the Dollar, the Euro has recently showed some counter trend action on the charts and that might allow for more eventual downside as the technically oversold condition was tempered. Unfortunately initial data for the Euro zone and the presence of additional deflationary pressure (from declining oil prices) probably leaves the bias in the Euro pointing downward. In fact, the presence of another new low in oil prices prompted Polish officials overnight to hint at a cut in interest rates to cushion that economy against ongoing deflationary pressures. Seeing the potential for legal challenges to QE simply leaves the bear camp with an edge in the Euro, but we can’t rule out a temporary return to resistance up at 1.1867 or perhaps even a bigger bounce, to fill a chart gap up at 1.1895. The Commitments of Traders Futures and Options report as of January 6th for Euro showed Non-Commercial traders were net short 153,137 contracts, an increase of 9,836 contracts. The Commercial traders were net long 210,377 contracts, an increase of 15,339 contracts. The Non-reportable traders were net short 57,242 contracts, an increase of 5,504 contracts. Non-Commercial and Non-reportable combined traders held a net short position of 210,379 contracts. This represents an increase of 15,340 contracts in the net short position held by these traders.
Technical Outlook: The stochastics indicators are rising from oversold levels, which is bullish and should support higher prices. The market’s short-term trend is negative as the close remains below the 9-day moving average. A positive setup occurred with the close over the 1st swing resistance. The near-term upside objective is at 119.1425. The market is approaching oversold levels on an RSI reading under 30. The next area of resistance is around 118.8950 and 119.1425, while 1st support hits today at 118.0450 and below there at 117.4425.