Following comments by major party leaders and the US 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," Comments 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," Lee points.
Is the war! Bears vs bulls
The EUR/USD is now almost flat on the day at 1.2940 with the next support at 1.2881 (low Nov.2) followed by 1.2829 (MA21d) and then 1.2827 (low Nov.22). On the other hand, the first hurdle lies at 1.2946 (high Nov.28) en route to 1.3008 (Upper Bollinger) and 1.3010 (high Nov.27).
As for the short term, hourly indicators points higher in the 1-hour chart, according to the FXstreet.com Forex Studies, the CCI, Momentum and ROC remains bullish while Stochastic signal bear.
FX Instructor's analyst Mark De La Paz comments 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, 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".