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Article / 13 February 2013 at 15:38 GMT

EURUSD levels from here

Head of FX Strategy / Saxo Bank

We saw a smart little reversal today – but one of those untrustworthy ones driven by a random comment in a Draghi interview and after a break that looked like a run on stops ahead of US Retail Sales data. Tomorrow and Friday are the real test for EURUSD direction.

With 20-20 hindsight, EURUSD has been ticking off the Fibo retracements on a daily basis all week – on Monday it was the 0.236, Tuesday the 0.382 and today the 0.50. Then we get a sharp correction on a comment from ECB president Draghi in an interview with Germany’s Bild Zeitung that he worries the Euro strength will hurt the recovery in the crisis states. This quickly took EURUSD back to the key support area in 1.3470 – about where it found a top yesterday. That level is giving way at the moment, which shifts the focus to the 1.3428 support/former resistance on the way up.

So the swing areas tomorrow (or late today if the energy stays high today) are perhaps 1.3430/15 and 1.3475/1.3500, with an hourly close through these zones to help determine whether we are to experience the (downside) structural breakdown in what so far can still only be called a consolidation, or whether we can swing back higher and challenge those 1.3700+ highs. I prefer the downside scenario - but we have a BoJ meeting tomorrow morning and the upcoming G20 tomorrow/Friday and the JPY is an important player here as well due to the popularity of the EURJPY cross.

Chart: EURUSD hourly



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