The Euro has continued to stabilise today, as traders lock in profits on short positions ahead of the weekend and with one eye on next weekâ€™s FOMC meeting.
Today we get the US retail sales which will cause some volatility but ultimately I suspect we are in for more of the same, with the chance of another squeeze higher should the reverse head/shoulders play out, as we discussed yesterday.
The neckline of the S/H/S is at 1.2950, and while below there it could be that the downside reasserts itself, but a break higher would take the Euro back to the session highs (1.2952) and then beyond, towards the 200 HMA now at 1.3030 and then on to the S/H/S target at 1.3060, where the descending trend and Fibo resistance would probably cap it (1.3057:23.6% of 1.3700/ 1.2958) and provide another sell opportunity.
On the downside, below 1.2900 and then below yesterdays low at 1.2888, would head back to the trend low at 1.2858. I am not sure that we see it down here today, but if wrong, as we said before, there really is not a lot to stop it heading to 1.2800 and then to the target area of 1.2780 (major rising trend support; from July 2001) which comes just ahead of the 9 July 2013 low at 1.2754.
Look for a session of choppy sideways trade, with the chance of some more position squaring ahead of the weekend which could take the Euro a bit higher, but the overall trend remains undoubtedly lower and 1.2750 could be seen next week if the Fed take a more hawkish outlook on the economy.
Economic data highlights will include:
EU Employment Change, Industrial Production, US Retail Sales, Business Inventories, Rts/Michigan Consumer Sentiment Index.