Forex: EUR/USD corrects over-extended downtrend

[Ramon Ramirez]

FXstreet.com (Barcelona) - An improved mood in the Asian session has seen overstretched bearish trends on risk currencies taking a turn higher. EUR/USD is nearing 1.2750 from levels below 1.2700 in NA trade. AUD/USD has also jumped to 0.9950 from 0.9870 in the last European session.

The market has been a one way street favouring the USD lately, courtesy of a potential fracture of the EZ as Greece edges closer to the abyss, however, techical market dynamics appear to finally outweigh the fundamentals in Asia. S&P futures are also moving higher, helping underpin risk currencies.

EUR/USD, which has been offered merciless since breaking its old range at 1.2950, saw a basing pattern taking shape at 1.2680 early US trade, just over 50 pips away from beckoning last Jan lows at 1.2625/30. The highly liquid EUR/USD has been on a crusade to higher ground since the NY close though, now approaching 1.2750/60, where sellers may be noted.

Should the correction pick up momentum, the pair may enjoy a no congestive zone of 50+ pips until reaching 1.2810/20, May 14 swing low. Further up, earlier in the week above 1.2900 was a re-sell zone, so it should be noted a 'value area' again for sellers. On the downside, support at 1.2680 is the next hurdle to take out before Euro bears launch a final attack to 1.2625 Jan lows. Below, the round number 1.2500 may come into play.