I have mentioned a few times in the last few daily forex analysis posts that in order for the bottom side pressure to be relieved, 1.3650 must give way. So far that mark has put up great Resistance on attempts to overtake it. The low last Friday was in the 1.3450 area and marked a new yearly low for the pair. I was a bit surprised by the strength Overnight with the news coming out of China yesterday. There was another round of imposed tightening from the central government. I thought this would have the same effect the Fed's surprise Thursday announcement had. Though I am sure it helped with the 1.3650 front holding, it certainly didn't create a fall in the pair.

The USDINX fell away from its brilliant yearly highs reached on Friday. The daily candle on the index does not look promising for the USD. I am not suggestion that the top side is done but that going forward may be tough ground to cover. The 100% projection of the move from 11/26/09 lows to 12/22/09 highs was complete once 80.85 was hit last Friday. By those standards, 79.50 should come back into focus as the 38.2% Retracement line as well as 78.94, the 50% line. What does this mean for the EURUSD though. USDINX at 79.52 may put the EURUSD in the 1.3750 area. This would coincide with a resistance line drawn on the highs from 02/09/10 and 02/17/10.

USDINX in the 78.94 area may take the pair back to the 1.3900/25 area, either way 1.3650 is key. For any long to look good to me, I will have to see 1.3650 break and then act as support. I would then start looking for a nice long position to sit on for a few days to a week. If there is another test of 1.3650 that holds, then the 1.3200 area I have been mentioning is likely to come under pressure. For the next several hours though, I think we just see sideways action between 1.3550 and 1.3630. Unless there is some surprise lurking in the wings, there isn't much to send the pair off running.

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