The EUR/USD tumbled back towards previous May lows yesterday after rumors circulated that China's SAFE is reevaluating its reserve exposure to the Euro. However, the EUR/USD shot back up today after a government official dismissed the rumors as ridiculous. Regardless, the volatility in the Euro over the past 24 hours shows the influence decisions in China can have over FX markets. Meanwhile, Geithener is visiting Germany and encouraging the EU to have a more unified stance in dealing with the fiscal problems. If Geithener can manage to provide an image of solidarity among Western nations this could help hold the EUR/USD above May lows. Speaking of fiscal issues, Spain and Italy are in the process of piecing together their respective austerity measures as nations across the EU try to trim their budgets to give investors more confidence in their bonds. Though this should prove to be a wise decision for the Euro's long-term outlook, the cuts could dampen medium-term growth and this is why the currency is dragging. Meanwhile, investors are waiting on U.S. prelim GDP. We received another solid set of U.S. data yesterday, leading investors back towards the dollar amid heightened uncertainty in the EU. It's becoming more apparent that the Fed will need to tighten before the ECB, and this is also weighing down the EUR/USD. As usual, investors should could a sharp eye on the news wires since there is a high probability of more action in the EU as governmental leaders try to squash speculation. Regardless, the EUR/USD is still under considerable downward pressure and the story remains whether the currency pair can hold these previous May lows. If not, then we may see a test of 1.20 over the near-term. The EU will be quiet on the data front tomorrow, leaving U.S. data and psychological forces in the driver's seat.

Technically speaking, the EUR/USD faces multiple downtrend lines along with intraday and 5/24 highs. Additionally, the psychological 1.24 and 1.25 areas are now serving as technical barriers. As for the downside, the EUR/USD has supports in the form of intraday and 5/19 lows. Furthermore, the psychological 1.20 could serve as a solid cushion should it be tested.

Present Price: 1.2258 Resistances: 1.2268, 1.2280, 1.2304, 1.2318, 1.2341, 1.2369 Supports: 1.2234, 1.2208, 1.2191, 1.2167, 1.2146, 1.2120 Psychological: May 2010 lows, March 2006 lows, 1.24, 1.25, 1.20

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