The single currency could find the power to get over 1.30 versus the greenback because of the flash release of Dec EU manufacturing PMI index which has come at 46.9 while it has been expected to be 46.2 from 46.4 in November and also the flash reading of Dec EU Services PMI index which rose up to 48.3 from 47.5 in November while it was expected to decline further in the shrinking territory below 50 to 47.1 but the single currency has eased back below 1.30 as it is still finding difficulty to have a place above it after breaking it yesterday as the uncertainty is still remaining about the crisis outlook as the market participants have not found out what can make them sure about that the worst of the debt crisis is over while the signs of the recession are still emerging in the Euro area

The single currency has reached yesterday 1.2945 versus the greenback by a new recorded high yielding of the 5 years Italian bonds since the single currency inception for covering 3 billions euros despite the recent ECB's decision to cut the cost of borrowing by 0.25% to be again 1% as again as it was before April meeting as the worries about the EU debt crises are still containing the markets sentiment from a side and from another side, because of the current EU inflation rate which is still at 3 years high at 3% yearly lowering the attractiveness of these bonds which have not become a safe haven option to the investors anymore despite the rising recession signs in the euro zone.

The Single currency downward momentum has accelerated since last week ECB's interest rate cut by 0.25% with a dovish statement about the EU Economic growth focusing in the ECB's efforts for offering cheaper money with no reference to direct interventions injecting new funds in the EU bonds markets assuring that the ECB is forbidden from monetary financing on the current EU treaty to the governments referring to that the ECB should stick to the treaty spirit and the governments should do too.

While the greenback is finding strength on the recent improvement of the US economic performance which gives the Fed leeway to delay a new QE3 further that 's beside the demand for it with the current risk aversion sentiment which dampened the demand in the equities markets especially after the Fed's recent assessment which mentioned this improvement with no reference again to lower the possibility of a new QE3 soon giving support to greenback versus the gold too.

God willing, the single currency can face now supporting level versus the greenback at 1.2945 which could help it to rebound yesterday and in the case of breaking it, there can be another supporting level at by 1.2873 whereas the pair has recorded this year low on the 10th of last January and breaking it can open the way for 1.2586 which has been the formed bottom on 24th of August 2010 and this can be followed by 1.2151 which is the last low before 1.1876 whereas the pair has rebound forming its bottom on 7th of June 2010 to 1.4939 whereas the pair has managed to ease back again on 4th of May 2011 after a bubble in the commodities market.

While its way up can be met by resisting levels now at 1.3098, 1.3236, 1.3283, 1.3432 before 1.4385 again which capped the pair gains last week putting technical pressure too on this pair and breaking it can lead to another resistance at 1.3546 which has been reached after the Fed's coordinated action to lower the USD cost of borrowing with other five Central banks and the ECB was one of them and breaking 1.3546 can be followed directly by 1.3567 which stands before 1.3613 and breaking it can open the door again to 1.3808 then 1.387 which pressed down the pair capping its rising many times last month.

Kind Regards

FX Market Strategist

Walid Salah El Din