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It was a quiet overnight as traders seemed to take a break and take stock on the market. The EUR actually staged a bit of a rally yesterday, fending off the 1.2670 support level to retrace back overnight and test the 1.2740 resistance area. There was no news to back up the reversal and traders attribute the move to the “ebb and flow” of trading, as shorter term traders closed short positions when there was no follow through downward at the 1.2670 area. Greece remains at the center of the EUR woes as differences between the EU and the IMF were made public.

The ZEW indicator was lower than the consensus as the index declined from 11.5 in October to 15.7 in November. As economists call for an economic downturn in Germany, the ZEW number seems to confirm that prediction. A German recession heading into next year is expected as the debt crisis intensifies and overall Eurozone consumer confidence weakens.

In other currency news, the USD/CAD remains above the parity level as concerns over the US fiscal cliff are starting to affect the Canadian currency as a slowdown in the US economy will certainly affect the Canadian economy. Support for USD/CAD remains at 1.0000 as well as .9980. There is resistance at 1.0035, followed by 1.0055. The USD/CAD would need a close below .9980 to reverse the latest upward move.

The Australian Dollar has remained firm overnight as ratings agency Moody’s has stated that the country should retain their AAA rating. Moody’s cited Australia’s strong government finances as well as strong banking institutions and a stable political framework as reasons for their rating retention. AUD is trading in the 1.0450 area and resistance is expected at 1.0470, and 1.0495. Support for the currency is at 1.0420 and 1.0400.

USD/JPY has moved back towards the 80.00 level after trades above the 79.60 resistance area triggered stop loss buying. Sellers at the 80.00 level slowed the rise, but a break there could see a retest of the 80.40 area. Support now is at 79.65, then the 79.40 area.

As I conclude this report, the EUR has broken above 1.2740 as short covering continues. Without any real news at present, this move will depend on the amount of short positions being covered.

Markets will begin to focus on the Friday meeting between President Obama and leaders of Congress from both sides of the aisle as negotiations begin on solving the fiscal cliff.

Equity markets overnight were mostly higher and the European equity markets are following that lead and are higher as well. DOW Futures are stronger this morning indicating a positive opening to the US equity markets.

Further reading: All you need to know about the fiscal cliff.