The Euro, after initially outlining the 1.26 zone as being powerful potential support 2 weeks back the EURUSD rallied powerfully, spurred on by good stories from Greece and signs the Euro zone were making active steps in avoiding disaster with another financial emergency. Whether the proposed measures will be successful for Greece in the long term still has to be seen, but for the short term forex markets traders appear to be happy.

At the time of writing the domino effect does seem to continue, as no sooner is Greece being dealt with do the sights turn toward Portugal again. Portugal clearly wants to pull in money through its Bond sales, sadly investors are extraordinarily nervous relating to Portugal’s capability to repay speculators and I myself am not sure that investors will want to risk taking a haircut as in the Greek situation.

How this will affect the Euro Dollar and the timings remains to be witnessed but will be fascinating to work out if the EURUSD reacts at the zones highlighted below.

The EURUSD, after its quick ascent from this area for two weeks straight really took a break at the weekly 38.2 Fibonacci level at 1.3240 a little off of the 50% Fibonacci retracement area that I was speculating about last week. With the initial reaction off of that level the Euro Dollar came down to a 38.2 Fibonacci of the last two weeks upward move.

Again the EU Buck has found support and is, at the time of writing, moving back up to check the 38.2 area once again. If this holds we might be heading back down to retest support at the 1.26 area. If it doesn’t hold then the Euro Dollar should continue to what I consider the primary resistance area up at the 1.34 area. Being a dynamic average the weekly 20 simple moving average has come down a bit by around 50 pips and could really play at providing solid resistance before ultimately striking the 1.34 zone.

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