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Daily Outlook: Technically both a higher high and a lower low were established yesterday, but ultimately the day was bearish as a the pair closed below Mondays open, and the failed rally above 1.3500 led to a swift drop in the pair. We still find ourselves in bearish territory as the higher timeframe daily charts clearly show the pair has been steadily and consistently bearish since December of 2009.
Fundamentally we have a showdown between the US and Eurozone economies - which one will show strong signs of economic recovery. Greece did work out a deal with the IMF but Portugal, Italy and Spain still loom as potential dead weights for the Euro. Investors were apparently not impressed with the Greece deals as the yield they demanded to cover the countries debt actually increased after the deal was announced (meaning it is now more expensive for Greece to finance its debt). Across the pond in the States a report of rising consumer confidence gave the greenback the ammunition it needed to mount a brief rally.
To me the problems Europe has with Greece, Italy, Portugal and Spain is no more severe than some of the problems US states (think California) are having paying their own bills. The difference is the US will definitely support the states whereas a failure of Portugal and Spain would be questionable for Europe.
Trading Idea: Overall I am bearish and looking for opportunities to short. Primary trade is to look to fade rallies into the 1.3450-1.3475 resistance zone, with short targets from 1.3475 at 1.3450, 1.3420 and 1.3390.