Forex traders decided to take profits on euro longs, despite the growing cloud of a renewed bond buying programme by the Federal Reserve, plus speculation that private sector creditors are willing to accept a coupon rate of 4% on new Greek bonds.

EUR/USD pushed up to a session high of 1.3184, before falling back to 1.3078 in Asian trade. The pair has enjoyed a strong move higher of late, predominantly on the back of some heavy short covering, so it was disappointing to see such a strong move lower without any clear cut reason as to why. Some are suggesting that it was down to poor US home sales numbers, and others believe it followed the S&P 500, which looks as though it hit resistance at 1327 (the downtrend resistance from the all-time high from 2007) and pulled back sharply. The technicals on EUR/USD are still quite positive, with a bullish trend maintained, where the market is keenly awaiting a break of 1.3198 which would suggest a higher move to potentially 1.34 over the coming weeks.

Support is seen at 1.3060 ahead of 1.2931, and given the trend and the potential for a resolution in the Greek debt swap saga, we feel the market will be looking to buy dips as opposed to selling rallies. Tonight traders will keenly await M3 money supply from the eurozone (expected to increase 2.1% y/y), where a lower-than-expected read would be bearish for the euro, given the concerns of credit growth. Italy will also look to tap the market for €11 billion in short-dated bills, which, given the recent demand. should not be a problem. In the US, Q4 GDP should print 3% on an annualised basis, while core PCE and University of Michigan confidence figures could also throw the USD about.