Forex Flash: EUR/USD ranges to the downside but can it hold support? – Commerzbank & UBS (Barcelona) - EUR/USD has largely range traded today, holding at classic S1 support as rafts of mixed data, fail to add momentum to the risk off trading seen following the latest fiscal cliff fiasco out of the US. However, with much of the calendar over for this week, can we see spot break lower in a thin market so close to Christmas?

Karen Jones of Commerzbank feels that at last EUR/USD is showing signs of correcting lower following the recent dragonfly doji and a 13 count on the TD combo. She notes that both factors together with a diverging RSI, imply exhaustion in the upmove. She writes, “We remain wary of a correction lower to 1.3155/40 then 1.3061, 1.2985 (these are all Fibonacci retracements of the move higher from November). Geoffrey Yu and Gareth Barry of UBS however are bullish on the pair and feel that the risk is for extension of strength as long as support at 1.3143 holds. The recommend watching for a test of resistance at 1.3386 and then 1.3493.