Overnight news suggests that the ECB will raise rates soon; traders caught wrong-footed and covered shorts hard. Stops noted above the 1.5630/40 area and the press to fresh highs at 1.5680 area likely to hold as resistance near-term. Today’s PPI data could ignite more buying if disappointing.

The downside correction is likely over if a close is above the 1.5640 area today. Crude prices will likely continue offering a bit of volatility support on dips. Longs likely to have rolled up stops under the 1.5520 area so volatility possible. I would stay away from the short side for the rest of this week.

The rate is setting up for a potential upside recovery. Bounce back from dip under the 1.5500 handle suggests active buying on dips; traders say lots of official and sovereign names seen buying dips. I think the recovery has some legs this time.  

EURO/USD Daily

Resistance 3:  1.5730
Resistance 2:  1.5700
Resistance 1:  1.5670/80
Latest New York:  1.5645
Support 1:  1.5600
Support 2:  1.5550
Support 3:  1.5500

Data due Wednesday: All times EASTERN (-5 GMT)

4:00am EUR German Ifo Business Climate Index 102.1
4:00am EUR German Ifo Business Expectations Index 96.5

Forex Analysis by Jason Alan Jankovsky at ForexPros.com. For more details about Forex Trading and Tips for decent earnings through Forex Trading, Please check http://www.forexpros.com