The technicals are showing increasing signs that the euro is forming a base for a relief rally after today’s market action showed a quick turnaround after an early fall.
For the second day in a row, the euro has found strong buying interest in the 1.3440 to 1.3460 range. It has now rejected that level four times in three weeks.
We are still cautious on EUR/USD but believe the risks are skewed toward a strong euro in the short term. A break of 1.3690 would certainly encourage us. We see the potential for a swift rally to 1.40 or even 1.42.