After dropped and bottomed at 1.3267, the Euro was supported significantly on Friday as EU finally “agree” on IMF involvement to provide rescue package for Greek, drove the pair higher, topped at 1.3424 during a volatile market. The question now is, will the bullish run continue? Are we seeing a sign of bullish reversal here as Euro finally solve its problem? I don’t think so. There is not enough evidence to support that conclusion. Not yet.
1. From technical point of view, as you can see on my daily chart below, the major trend remains bearish as price still move inside the major bearish channel and Friday’s bullish momentum was just a normal correction after significant drop. This bearish outlook can only be canceled by violation to the bearish channel. The 1.3450 resistance area will be the key resistance area at this phase because a break above that area could trigger further bullish momentum testing the bearish channel and could be a serious threat to the bearish scenario. On the downside, key support level is seen at 1.3250 area. Break below that area should continue the bearish scenario testing 1.3100. It’s true that the pair might be in technical critical phase with potential bullish reversal scenario, but we’re not there yet.
2. Euro topped at 1.3424 after EU finally has something “real” to save Greek by bringing in the IMF. Bloomberg reported that Trichet, the ECB president who earlier said that IMF involvement is bad for the Euro zone, suddenly changed his mind, said that he is happy with IMF involvement. Well, that’s weird. He may under political pressures to make those inconsistent statements on such important issue and that fact may create doubts on ECB’s independency, credibility and ability to solve the problems. If it’s true, that could be a bigger problem than just Greek’s debt crisis or Portugal downgrade. I think the Euro zone fundamental outlook is not in positive territory yet. Well, I might be wrong and market optimism on the Euro zone may continue to increase next week thus bring the Euro higher. I would be a fool to go against the market but until my technical study confirms further bullishness, I am still on the bearish side.
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