The main argument that explain the rise of the Euro against the dollar is that the north Africa crisis will boost energy prices, especially the Brent and so will impact on the European inflation. Now because for the ECB is mandatory to keep inflation below 2% they will increase the interest rate to contain the inflation.
My point is that inflation from a problem on the supply side is not the same as inflation from strong demand due to an excess of liquidity. I am not sure what is more important between containing the inflation and not killing the demand or the grow. Increasing the interest rate will have an effect on the inflation only reducing the demand and killing the grow...I am sure nobody want it, as I am sure nobody will hike interest rate soon, just rumors.
The possible scenario about the Libyan crisis make clear that it will not be resolved soon unless Gaddafi step down, but He made clear that will not step down and prefer to die as a martyr, so let's assume that the libyan instability will be really long and energy prices will go further up.
Technically we are trading close to the upper bollinger band, but the RSI is declining. Yesterday the pair managed to go over the 1.3720-1.3750 area, considered an important resistance, but didn't go far away and right now is back at 1.3735. A return to 1.3710 may push the pair down to 1.3650-1.3635. while on the other side the resistance have to move up probably 1.3812? will see today.
Here are some support and resistance:
|R4 1.4053; R3 1.3951; R2 1.3849; R1 1.3812; S1 1.371; S2 1.3645; S3 1.3543; S4 1.3441.|
Today we will have the Core Durable Goods Order, Unemployment Claims, New Home Sales, so let's pay attention, the market will move for sure, and a bad news here will push the pair really high.
As the pair is moving down, I have sold here, and will close before the economic stats came out, unless I have enough pips to play the stats.