Euro rallies on EU summit as dollar continues to slide

The euro was the best performer an hour into US trade, advancing more than 1% against a weaker dollar. Market sentiment continues to improve as EU officials conclude a meeting in Brussels to devise a mechanism to stem the threat of contagion in the region as the debt crisis reaches critical mass for Greece. Early reports cite the possibility for a short-term Greek default as part of an aid package for the debt laden country. The single currency broke above the 100% Fibonacci extension taken from the June 16 and July 12 troughs at 1.4330. Topside targets are eyed at the 1.44-figure, backed by 1.4420 and 1.4450. Interim support rests at 1.4295 with subsequent floors seen at the 76.4% Fib extension at 1.4215 and 1.4170.

Key Levels/Indicators

Level/Indicator

Level

50-Day SMA

1.4300

20-Day SMA

1.4275

10-Day SMA

1.4155

2011 EUR High

1.4939

The Swiss franc was the weakest performer against the greenback which continues to slide against all its major counterparts. As risk sentiment continues to improve, the swissie will see remain under pressure as traders go on the hunt for yields. However the dollar will stay on the defensive as traders jettison dollar holdings on concerns over the looming August 2nd US debt ceiling deadline. Accordingly the pair is likely to see further moves to the downside. The USD/CHF pair continues to hold just above the 0.8185 interim support level with a likely break eyeing downside targets at 0.8150 and 0.8130. Interim resistance is stands at the 100% Fibonacci extension taken from the June 15th and July 1st crests at 0.8248, followed by the 0.8275 and the 76.4% Fib extension at 0.8310.

Level/Indicator

Level

50-Day SMA

0.8482

20-Day SMA

0.8313

10-Day SMA

0.8228

2011 CHF High

0.8038

Michael Boutros, Currency Analyst for DailyFX.com is a Technical/Fundamental Analyst specializing in the FX markets.
E-mail: mboutros@fxcm.com

Twitter: @MBForex
WEB: www.fxcm.com

About the Author
Michael Boutros Michael Boutros, Currency Analyst for DailyFX.com is a Technical/Fundamental Analyst specializing in the FX markets. E-mail: mboutros@fxcm.com.
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