The recent constricted range of the euro-dollar was spoiled as the pair fell to $1.25 after the release of the U.S. housing data. From the get go, traders were expecting volatility from the housing numbers, especially a better-than-expected number. But the euro found excellent demand from the bulls and range-bound traders, sending the single currency higher off its low of $1.25. The search for euro bullish arguments continued, however. U.S. interest rate expectations continue to be muddled after 6 weeks of irresolution. Traders changed their expectations from a Fed cut, to a Fed pause, and finally to a hike. In addition, there is an enduring belief that the ECB seeks two more rate hikes in the future, indifferent to what data may come out. But these perceptions do not justly resonate with the central banks themselves. Regardless, the range-bound traders continue to use their interest rate beliefs to dictate to what degree they should be long the euro.

Across this backdrop, the bearish orientation remains in place with a 1.2400 target, completing the daily price channel. Below that, 1.2230 is a nominal target. To the upside, the risk-limit continues to be 1.2580.

Support & Resistance Table

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