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Market is bit relieved, though with cautious optimism, after the latest development in Italy and Greece. Italian Prime Minister stepped down, as promised, after parliament approved the austerity plan. This is only a temporary fix, the overall Euro Zone turmoil is far from over.

Let’s look at EURUSD weekly chart:

EURUSD Weekly Chart (click to enlarge)

Market was quite bearish on the pair until Friday when it rallied and finished with a long lower shadow on weekly EURUSD chart. From here price is most likely to move up towards the falling Trendline above. 1.4250 to 1.43 is the area price is most likely to target if we continue to hear positive news from Euro Zone.

On the other hand if market fails to remain optimistic about Euro, lower rising Trendline will be in sight. 1.3250 to 1.31 will the target area for bears.

EURUSD Daily Chart (click to enlarge)

On the EURUSD daily chart a new Trendline was formed last week when price bounced up and now it is looking to target the upper falling Trendline. 1.41 to 1.4150 is our near term goal for this pair if the price continues to rally.

We have relatively less important economic news release events this week, with no major ones due today. We can expect relative calm initially in the week with slight bullishness overall.

Forex Trading Signal : Look for opportunities to go long targeting 1.4100-50 area. Keep an eye on 1.3860 level which can act as resistance for any upside movement. On short side, we currently don’t see any trades.

In our Forex Signal yesterday we expected price to break out towards the downside. Price end up moving sharply lower and closed quite bearish on the daily chart.

Fundamentally, the main impetus behind the strong down move yesterday was the fear that Italy, one of the top 5 debtor nation, may default on its debt obligations. Buying US dollar as a safety net turned out to be a better option.

Let’s quickly look at EURUSD daily chart:

EURUSD Forex Signals (click to enlarge)

1.3600 was the key support area, which was broken yesterday. This area still holds the significance as price can come back to re-test it.

Keep an eye on the Trade balance and Unemployment Claims data from US later today which can effect the movement of EURUSD.

Forex Trading Signal : Our primary outlook is to stay with the trend and look for short opportunities as they arise. If we see a pullback then expect price to reach 1.3600. At 1.3600 wait for price to either break above to look for longs  or show signs of downtrend continuation for further short trades.