FX Headlines: Euro Gains Against Dollar, Yen Ahead of EU Summit
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• Portugal President Starts Succession Talks – Financial Times
EURUSD: The EUR/USD pair advanced in the overnight session for the first time in three days as European Union leaders began their two-day summit in regards to the sovereign debt crisis. Interest rate expectations remain high for the European Central Bank, on the back of relatively strong economic data, despite well-documented Portuguese debt concerns that led to the collapse of the country’s government. Indeed, sovereign debt concerns remain the number one issue for the currency bloc, though coupled with interest rate hike expectations, there has been a see-saw affect in regards to which set of fundamental news traders are letting guide the currency.
Taking a look at price action, a key level at 1.4204 appears to be the most significant level of resistance, having been the highest exchange rate the EUR/USD pair has closed at since November (when before then, the previous high occurred in February). Failure to have consecutive closes above the 100.0% retracement on the November 4 to January 10 move has put downside technical pressure on the pair. Support comes in at 1.3947 at the 20-SMA, but a break below would push the pair up against its 76.4 Fibo at 1.3886 on the aforementioned move. Going forward, over the next few days, the main risk posed to the pair is the results of the European Union Summit, as some sort of accord will need to be reached as the Portuguese government fell yesterday. Continued unrest in the Middle East and North Africa will be Greenback-bullish, and a bailout of Portugal would provide further downside pressure to the EUR/USD pair.
Written by Christopher Vecchio, DailyFX Research.
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