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Traders start out the week with the U.S. dollar broadly lower against the major currency pairs.  The moves comes on the hope the U.S. policymakers can reach a deal before the fiscal cliff deadline which in turn pushed sentiment toward risk appetite assets and away from the safety of the U.S. dollar.

The sentiment shifted abruptly when the U.S. Congressional leaders on both sides of the isle said discussions with President Obama went well.

The several leaders suggested talks about the automatic tax increases and spending cuts sue to go into effect the January 1 2013 and throughout the year were "constructive".

The Euro gain support on speculation that European leaders in the International Monetary Fund and within the Euro Zone could reach an agreement shortly concerning the delayed bailout payment for Greece. Word on the street is the IMF is looking to provide Greece additional 2 years to meet austerity measures.

However, the Euro move has been somewhat dampened on concerns that the Euro Zone economic outlook continues to look bleak after Germany’s central bank that Germany the largest economy in the Euro Zone is weakening due to the ongoing crisis.

But concerns over the economic outlook for the euro zone persisted after Germany's central bank warned earlier that economic growth in the bloc’s largest economy is weakening, as a result of the crisis in the region, as well as problems in the global economy.

The real Euro strength right now is coming in form a weaker Yen as Japanese official look toward the elections and new aggressive stimulus packages including a 3% inflation target rate. It’s this sentiment that is driving the down the Yen and supporting the euro.

The Euro's Bottom Line:The Yen is driving sentiment in the FOREX markets and is likely

to keep a bid under the Euro.  Looking at the EUR/USD we find price now hovering just below the 200 day moving average for third consecutive session.  The 200 day is acting as strong resistance as it has in the past and it’s here we want to take our stand. The risk/reward is fairly good but each individual should weigh and consult their broker.

Consider looking into selling the Euro against the U.S. dollar at 1.2790 with a target of 1.2635 and stop above the 1.2850 previous wave. Stop is above the wave to provide enough room for the pair to move around with the lower volume that should occur with upcoming U.S. holiday.

We will provide updates as needed in separate post in the Premium Section.

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