The euro ran through stops over the overnight highs to test 1.2994 before retreating. The market seems to credit selling euro rallies, and did so even before the Cyprus bank tax was announced over the weekend.
Those who sold overnight below 1.2911 got squeezed in US action as the unusual 150+ point opening gap (Friday close 1.3072, Asian open 1.2911) has been about half filled to today's high so far of 1.2994.The market adage that 'gaps will be filled' is based on the complete lack of price action through a price gap, so that when the market returns to the empty levels there are no orders or interest to stem the run and it usually proceeds until encountering normal order congestion, in this case above 1.3080. Tilting against a full return to Friday's closing levels is the potential fundamental damage to the united currency from a bank run in Cyprus or the failure of a Cypriot bank.
Stops are thought to be gathered above 1.3000 for a return to 1.3080. On the downside there is strong support at the 200-day moving average and at 1.2850-80. The euro has been above 1.2880 since mid-December. Today's low was 1.2881. If resolution of the Cyprus issues prompted a relief rally back to last weeks level's the euro would likely remain under pressure because of the poor state of the EMU economy.
Chief Market Strategist
WWM Flash Trader