Euro Bouncing, For Now

Since our January 4 article Dollar Feels The Heat, the greenback has succumbed to further weakness against the euro, as predicted. The European currency has gathered upward momentum as the foreign exchange market focuses intently on the possible ending of the US tightening cycle and the potential for further rate hikes by the ECB . The move through the US$1.2180/EUR level is significant in so far as it completes an inverse head and shoulders pattern on the daily chart suggesting a move to our current upside target of US$1.2500/US$, and quite possibly beyond. However, we would expect good resistance in the US$1.2500-1.2600/EUR area. US$1.2180/EUR now acts as key support.

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