The EUR/USD remains glued to the psychological support/resistance at 1.2800. However, the euro closed on Tuesday for its second positive day. The real gain was just 5 pips from opening price at 1.2810 to the closing number at 1.2815. News from Greece and the U.S. fiscal cliff didn't help for direction.
Ben Bernanke emphasized earlier on Tuesday that the "fiscal cliff" poses a significant threat to the U.S. economy, adding at the same time that the Federal budget edges to unsustainable levels. On the other side of the Atlantic, the Eurozone finance ministers continue to discuss options to bring down Greece's debt to 120% of GDP in 2020, but no solution has been found.
The EUR/USD bounced from a low of 1.2764 and reached a fresh two-week high of 1.2828 at the beginning of the New York session, although the cross lacked momentum and pulled back to the 1.2800 comfort zone. With short-term indicators holding the bullish tone, the pair has scope to rise to the 1.2840 area, and even 1.2900. On the downside, 1.2765 should offer support.
As far as the EcoFin meeting, it is still ongoing, and any "news of a deal during Asian hours should push EUR/USD higher (1.2876 is the November 7 high), and carry the AUD and NZD modestly higher in its wake," the NAB team stated in a strategist note. "Any failure, on the other hand, would see a plunge back to below 1.2700 and with a real threat, 1.2630 key support will be challenged in coming days. This, though, looks like a fairly thin tail risk."
As for the medium term, Currency Strategist Axel Rudolph at Commerzbank argues that rallies in the cross should be well contained in the boundaries of the key level at 1.2900, where the 55-day moving average sits. He adds, "the cross is revisiting the 200-day moving average at 1.2806 and could reach the 1.2825 11th October low, and also the resistance line at 1.2853 before coming off again… to 1.2661 and the area around 1.2480."
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