EUR/USD TECHNICAL ANALYSIS REPORT 06.07

EUR/USD: The market is once again very well bid with the latest gains managing to accelerate beyond resistance in the lower 1.4500’s and into the 1.4600’s thus far. From here, we still retain an overall bearish bias, but would look for gains to potentially extend some more towards the 78.6% fib retrace off of the major 1.4940-1.3970 move by 1.4730 before considering the possibility for bearish resumption. Back below 1.4450 would now be required to relieve immediate topside pressures.

EUR/USD: DAILY TECHNICAL ANALYSIS OUTLOOK

The euro hovered near a one-month high against the dollar on Monday, boosted by progress over Greek debt financing and a potential widening of interest rate differentials, enticing hedge funds to buy the single currency. The euro has jumped almost 4 percent in the past three weeks as Greece has inched closer to securing fresh aid to stave off the threat of a default. The EU and IMF have made clear a new bailout package, which would replace a 110 billion euro deal agreed only a year ago, depends on Athens keeping to its promises for further austerity and accelerated privatisations. A new package might cost more than 100 billion euros ($144 billion), German news magazine Der Spiegel said. Despite no long-term solution in sight for the euro zone's debt crisis, the euro is seen rising ahead of the European Central Bank's policy meeting on Thursday, when the bank is expected to prepare markets for an interest rate hike in July. Such an outcome would widen rate differentials in the euro zone's favour. "We believe that the ECB is set to signal on Thursday that the next rate hike will be in July and this positive interest rate dynamic will continue to help the euro," said Elsa Lignos, currency strategist at RBC Capital Markets. The common currency rose to a one-month high in Asia of $1.4659 . It last stood at $1.4650, up 0.1 percent from Friday's close. Traders said hedge funds were keen buyers of the euro in early European trade, while stop-loss orders were at $1.4670/80.

Technical analysts highlighted resistance at $1.4710 -- the 76.4 percent retracement of the euro's decline in May. But given the negative sentiment building against the dollar, some analysts are targeting a move to $1.50 in coming weeks. "The provisos are that U.S. equity markets fail to undergo a deeper correction and that Greece's political opposition does not scupper fresh austerity measures," BNP Paribas strategists wrote in a report. "A move higher towards our target of 1.5000 also requires that the ECB issue the requisite codeword signalling July tightening after Thursday's Council meeting."

Many expect the central bank to sound hawkish on inflation after its policy meeting and to use the key phrase "strong vigilance", which usually flags a coming hike. Speculators slashed their net long euro position in the international monetary market to a fifth of what it was a month ago -- another factor suggesting that the common currency may have room to rebound further.

EUR-OUTLOOK; Euro Touches One-Month High on Optimism EU Will Support Greece

The euro touched a one-month high versus the dollar on prospects European Union officials will reiterate their intention to prepare a new aid package for Greece, easing concern over the region's debt crisis.

The single currency also gained versus the Swiss franc before a report that may show producer-price inflation in the trading bloc held near a 2-1/2 year high in April, backing the case for the European Central Bank to increase borrowing costs. The greenback rebounded from a one-month low versus the yen while the Canadian dollar declined against all 16 major peers on speculation that signs of stalling growth in the U.S. will damp demand for the higher-yielding currency.

"The turning point was Greece, and we can suggest Greece is out of the way for the short term," said Kurt Magnus, executive director of currency sales at Nomura Holdings Inc. in Sydney. "There'll be fresh impetus to buy euro this week."

The euro climbed to $1.4658, the strongest since May 5, before reversing gains to $1.4625 as of 9:10 a.m. in London from $1.4635 in New York on June 3. The 17-nation currency was at 117.30 yen from 117.48. The dollar bought 80.19 yen from 80.34 last week, when it dropped to 80.05, the weakest since May 5.