EUR/USD: Let's Fundamentals Rock Our Technicals

By: Andrei Tratseuski

Risk is on this Tuesday morning. A combination of good news, bad news has stirred the Euro. First off, Moody’s credit agency has downgraded Portugal by two notches. The current rating stands at A1 compared to previous AA2. The following reopens the issue of sovereign debt default in the Euro-zone. However, the good news was also in the mix today as Greek government successfully raised €1.6 Billion in 26 week Treasury Bills at 4.65%. The upcoming test of Greeks ability to raise debt wills also come on July 10^th and 23^rd, when approximately €4.5 Billion will try to be raised. An important notion to keep in mind is the rate at which the debt will be sold at. As long as the rate remains below IMF/EU funding rate of 5.0%, the Euro will be rewarded.

The Euro economy without a doubt remains in dire situation. Today’s ZEW survey figures confirmed the uphill battle of the economy. ZEW economic sentiment printed well below the expectation, suggesting the current state of the economy possesses underlying problems.

Nonetheless, the risk appetite frenzy is on our hands as we see the Euro gain considerably. Looking at the technical levels we find our strategy for the day. Since the current short and intermediate trend is to the upside, this is where we will try to capitalize. Our first resistance point is derived from the 61.8% retracement of yesterday's high and today's low at 1.2650. The following resistance point lie at 1.2700, a psychological point as well as a 2-month high. Current support lies at 1.2600, a level from which an inter-day rally emerged as well as psychological level.