We’ve all seen the Brussels summit come and go.  Ultimately passing the most recent Greek fiscal package, European leaders did what most of the market was thinking.  But, the Euro hasn’t moved much since the announcement of the second Greek bailout package and some are questioning the single currency’s ability to move higher – especially above the 1.3300 technical resistance figure.

But, taking a look at the charts, and there exists a high probability that the single currency could reach higher – potential much higher than most are anticipating.  Currently trading at 1.3232, bullish euro traders could see the currency hit as high as 1.3550 against the US dollar.

Technically speaking, the euro has been in consolidation for the last couple of days.  The consolidation has created the beginnings of a technical pennant formation in the short term – with current price actually trading near the apex of the formation.  This means that a breakout is likely to occur in the next several sessions.  The direction is still unknown – as with pennant formations.  But, technical oscillators that are currently hovering in rather oversold territories is hinting at a likely upwards euro push against the greenback.

Stochastic indications are showing an uptick above the oversold benchmark of 20 – now currently at 46.70.  In the same light, the MACD (moving average convergence divergence) signal is showing a bullish convergence.  This means that the indicators signal line is making higher lows, as the price action makes lower highs – showing a building up of momentum.  These dynamics are indicating a breakout to the upside in the price action.

As such, we anticipate the first inevitable test to be the 1.3300 technical resistance level, or the top of the pennant formation.  Should the price action successfully penetrate this level, we expect a medium term recovery to 1.3550 – in line with longer term projections.

Article source: http://www.fxstreet.com/technical/analysis-reports/fx-technical-tweets/2012-02-22.v03.html