The Euro, after initially outlining the 1.26 zone as being solid potential support a couple of weeks back the EURUSD rallied powerfully, spurred on by good reports from Greece and signs the Euro zone were making positive steps in dodging disaster with another monetary disaster. Whether the outlined measures will be successful for Greece in the long term is still to be seen, but for the short term forex markets traders look to be glad.

While writing this the domino effect does appear to continue, as no earlier is Greece being handled do the sights turn towards Portugal again. Portugal obviously desires to pull in finance thru its Bond sales, unfortunately backers are really scared about Portugal’s ability to pay back investors and I actually am undecided that stockholders will wish to risk taking a loss 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 swift ascent from this level for 2 weeks straight basically took a pause at the weekly 38.2 Fib level at 1.3240 a little shy of the fifty percent Fib retracement level that I was talking about last week. With the first reaction off that level the EURUSD came down to a 38.2 Fib of the last 2 weeks up move.

Again the EURO has found support and is, at the time of writing, heading back up to test the 38.2 area again. If this holds we could be heading back down to retest support at the 1.26 zone. If it does not hold then the EURUSD should continue to what I consider to be the most important resistance area up at the 1.34 zone. Being a dynamic average the weekly 20 sma has come down a bit by around 50 pips and could essentially act at providing strong resistance before eventually reaching the 1.34 area.

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