EUR/USD suffers psychological setback

The EUR/USD has been dented by a psychological setback today as the currency pair drops back towards 1.27 after Germany's banking association announced that German  banks may need an addition $135 billion in liquidity.  The negative psychological turn has spurned uncertainty, sending Greek and German bond yields higher.  Although $135 billion is not a catastrophic figure, investors are a bit uneasy as they wonder whether there are more skeletons in the closet.  The data wire didn't help today with German factory orders coming in far below analyst expectations at -2.2%.  However, while the EUR/USD has certainly been damaged by today's news and data, the currency pair is still trading above September lows.  Hence, the EUR/USD could easily lock back into its near-term upward trajectory if investors receive some positive data this week.  The EU will release industrial production tomorrow and investors are expecting growth of 1.1%.  Investors will also be paying close attention to Australia home loans and UK manufacturing production data.  Unfortunately for bulls, today's announcement by the German banking association does leave the Euro a bit vulnerable should the markets receive a negative fundamental shock or more bad news.   

Technically speaking, the EUR/USD faces technical barriers in the form of intraday and 9/1 highs along with the highly psychological 1.30 level.  As for the downside, the EUR/USD has supports in the form of intraday and 9/1 lows.  Additionally, the psychological 1.25 level could serve as a solid cushion should it be tested.   Present Price: 1.2748 Resistances: 1.2765, 1.2786, 1.2802, 1.2820, 1.2833, 1.2852 Supports:  1.2747, 1.2731, 1.2715, 1.2695, 1.2677, 1.2653 Psychological: 1.25, 1.30

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