Headline risk is paramount in this type of situations. Rumors and news could come at any any time, so caution is advised.-
Regardless of the environment, the €uro has manage to find its footing into the 1.2840´s, are which has found buyers and has been respected since mid-November 2012.- It is the line in the sand, so far.-
Sunday´s opening gap has not managed to get filled, though.- Last Friday close was in the 1.3080, almost 80 pips above from it is currently trading.-
It is not easy to establish direction during this type of situations, however, there are some important scenarios to address and clear reference levels. Swings will likely have bigger ranges than usual due to the extreme volatility of the situation.-
a-) FAVORABLE NEWS SCENARIO could provide some fuel from buyers, which are still aligned towards record levels, according to what I am currently seeing.-
Price action from the lows at 1.2840 has been constructive. 1.2920-1.2890 as a key area.-
1.30120-1.3010 is a key area that is currently providing some rejection. However, It is important to note the pressure from buyers is currently on, as I’m writing this post.-
Provided buying pressure continues, I will be watching 1.3085-1.3060, followed by 1.3075, 1.3087, 1.3108 & 1.3121.-
Above, a clean brake of 1.3160-1.3040 could potentially open the door towards the the 1.3195-1.3182, followed by 1.3220, 1.3270 and finally 1.3320, as extended targets.-
Alternatively, bad news/bad interpretation of those news will likely bring a negative impact.- I pointed out above about the important positioning of longs. Similary to other instances in different assets I follow, this type of situation could spark an important selloff in which those longs gets pressured by intense selling pressure, fueling an important move.- It is not possible to determine the extent of that reaction.
However, some key levels to have a as reference are worth to note.-
1.2918-1.2886 is the first key reference I am watching now, followed by 1.2880-1.2860. A breach of these will bring a test of the 1.2840 area, which buyers have defended over the last 5 months, sionce Mid-Novemeber 2012.-
Below, I am looking into 1.2805-1.2775, followed by 1.2740, 1.2720 and 1.2700-1.2660.-
At last, a third option will be containment between the current area in which markets mantain balance awaiting for a resolution -either positive or negative, in that sense, I will be looking for a (wide) range between 1.3020-1.2880, eventually 1.2840 which -again- as a key price point.