Euro Eyes Retest of 100-Day SMA; Sell @1.3100

Fundamental Catalyst – Some optimistic comments out from G20 this weekend have helped to bolster risk appetite into Monday, with the global equity markets continuing where they left off in the previous week and rallying impressively yet again. Vows from the G20 to quickly clean up bank’s toxic assets and to restore growth have been a significant driver, while news that Barclays has made a strong start to 2009 has also helped to prop investor sentiment. However, we would once again caution traders in getting overly optimistic at this point, as the common pattern throughout the global economic crisis has been one that often results in the onset of more unexpected bad news, to quickly remind that we are far from out of the woods. Additionally, data out of the Eurozone of late has been coming in on the weaker side, and the European Central Bank has had to come to terms, perhaps too late, with having to adopt a more accommodative monetary policy. We expect this to continue to weigh on the Euro, with interest rate differentials to narrow even more in favor of other currencies including the USD.

Techs –Eur/Usd – Continues to extend gains into the early week with the market now threatening a sustained break back above the 1.3000 psychological barriers. Next key topside resistance comes in the form of the 100-Day SMA at 1.3055, followed by the 1.3095 inter-day high from February 9. Nevertheless, the overall trend still remains grossly bearish, and we will look for an opportunity to sell back into the broder down-trend, with gains seen limited to the 1.3095 area on Monday. Strategy: SELL @1.3100 FOR A 1.2730 OBJECTIVE, STOP @1.3220. Stops to be trailed to cost on a break back below 1.3040. If trade triggers and 1.3040 not broken, position to be closed out at NY close (5pm EST) on Monday. Recommendation to be removed if not triggered by NY close on Monday.

Written by Joel Kruger, Technical Currency Analyst for
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