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EUR/USD enjoyed an active Asian session to make very significant gains in the wake of the new week. With the  back wind of the Greek plan, is the Euro changing directions? Not so fast.

During the Asian session, EUR/USD made a move above 1.3423. This was the previous support line. When the pair was trading higher, it fell towards this line several times, and bounced back up. When if made the breakdown last week – it was massive – EUR/USD went as low as 1.3267.

The hay that broke the Euro’s back was the credit downgrade of Portugal. As this came together with the ongoing Greek crisis, a dark shadow was cast over the Euro-zone’s ability to pay debt. And then, things changed:

The recovery

But since then, the leaders of the European Union managed to find a solution for Greece – a safety net. This safety net isn’t a full-proof solution, but sure is good news. The Euro, that already went half way towards the next support line, 1.3080, recovered and ended the week at 1.3409, close the previous support line – now a resistance line.

During a very active Asian session in the beginning of the new week, the dollar retreated. It’s important to notice that these drops in the dollar happened also last week at the exact same time. For many currencies, this was just a move within the range.

But for the Euro – this dollar retreat, on relatively thin volume, lifted EUR/USD above the hurdle. Most of the move happened as the market opened. EUR/USD reached 1.3502, not far from the 1.3530 resistance line. At the time of writing, it trades just under 1.35.

Short term? Long term?

EUR/USD bulls may analyze this as an extension to Friday’s move – traders are happy with the Greek accord and are pushing the currency higher. It’s now back in the wide range that we’ve seen before – 1.3423 to 1.3850 and has more room for rises. Perhaps a long term rally can be seen after months of decline.

On the other hand, the European troubles are far from over, and the resolution of the Greek crisis could merely be only weight off the Euro’s shoulders – one out of many.

Also when examining the technicals, the pictures is mixed. 1.3423 was a very convincing support line. It was an important line in the past, and sure worked as a support line in recent months. When the pair broke under the line, the move was strong – as expected from a break of a strong line.

But now that this support line was broken, is it that significant also as a resistance line? Does the break above this line mean a bullish move? It ain’t necessarily so. This line is still meaningful, but in a lesser grade than beforehand. EUR/USD can sure dip under it, encountering less resistance  – less stop orders.

What do you think? Given the Greek resolution and the break upwards, is the Euro going up? Or is this just a temporary rise, enjoying thin volume at the start of the week?

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