Bears and bulls continue to fight for the euro. After falling to a low of 1.2879, the EUR/USD managed to recover some ground to waver in a neutral zone between 1.2900 and 1.3000. A confirmation through either of these levels could set a clearer direction for the short-term.
Following comments by major party leaders and the U.S. President, both the euro and Dow Jones Industrial Average bounced back from previous losses in the session. Early on Wednesday, Speaker Boehner said he is "optimistic that we can continue to work together to avert this crisis, and sooner rather than later." Later, President Obama commented that their "ultimate goal is an agreement that gets our long-term deficit under control." Obama believes that "both parties can agree on a framework that does that in the coming weeks."
The Dow Jones rose 0.83% or 106.98 pts to close the day at 12,985.11. The S&P 500 advanced 0.79% or 10.99 pts to finish at 1,409.93. And the Nasdaq Composite climbed 0.81% or 23.99 pts to end the day at 2,991.78.
"The sentiment is helping to boost the single currency heading into afternoon trade, adding to positive sentiment established earlier by a Spanish bank bailout," commented FXstreet.com analyst Richard Lee. "Averting the Fiscal Cliff is anticipated to be in the best interest of the world's largest economy -- as activation of the cliff is expected to sap almost 1.5% off annualized gross domestic product."
Bears Vs. Bulls
The EUR/USD is now almost flat on the day at 1.2940, with the next support at 1.2881 (low November 2) followed by 1.2829 (MA21d) and then 1.2827 (low November 22). On the other hand, the first hurdle lies at 1.2946 (high November 28) en route to 1.3008 (Upper Bollinger) and 1.3010 (high November 27).
As for the short term, hourly indicators point higher in the 1-hour chart, according to the FXstreet.com Forex Studies. The CCI, Momentum and ROC remain bullish, while Stochastic signals bear.
FX Instructor's analyst Mark De La Paz commented that the hourly chart suggests a possible bounce in prices. "The immediate support at 1.2902 is rated as moderate. With a high credibility bullish reversal pattern, consider buying from just above 1.2902. The immediate target will be the daily pivot point at 1.2955, a break of which suggests a further rally to 1.2995. Stops ideally should be just under 1.2902."
In a wider timeframe, analyst Gareth Barry at UBS confirms the bank's bullish outlook on the cross, arguing, "The pair failed from resistance at 1.3023. Any downside appears to be limited and support at 1.2876 should hold. A break above 1.3023 would open 1.3172."
On the other side, "The Greek deal roughly coincided with the near-term top for the EUR (just above 1.30) and yesterday's price action was rather bearish technically (an outside range day)," TD Securities analysts said. "A clean break of 1.2900 (through 1.2880) should open up to a deeper slide toward 1.2800 (200-day moving average). With longer-term signals still pointing higher, however, this move may prove to be just a partial retracement of the recent rally."
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.