This afternoon the news hit the Bloomberg terminal that the financial world had been hanging out for -"Euro-area leaders agreed to drop the condition that emergency loans to Spanish banks give their governments preferred creditor status, European Union President Herman Van Rompuy told reporters after a summit early today". It's amazing how a few simple lines of text were enough to put everyone into a 'risk-on' mood - the question is of course - how long will it last?

To make any sense of the wider theme I refer to someone much more able to comment on such matters - Paul Krugman. In his book End this depression now he says "Europe's awkward combination of unity and disunity - the adoption by most nations of a common currency without having created the kind of political and economic union that such a common currency demands - has become a gigantic source of weakness and renewed crisis. From this we can see that there is a long way to go before we can resolve the situation in Europe and this will not be done with a single headline - at least not based on what we have seen at negotiations in the region so far.

This brings me to theEuro-3-Step - the need for fiscal, political and banking unity. What we have seen today would generously be called half a step towards achieving the necessary union that is required for such fundamentally different countries to find the accord that is needed to function efficiently. But let's not rain on the parade too early - let's have a look at the charts and try to determine some possibilities as to where we are headed from here.

Euro - Weekly chart with 200 Week MA and 50 Week MA with volatility bands

If you take a macro view of the Euro you can see that the rate has broadly been in huge oscillation for many years now with the post-GFC downtrend never really being arrested. There is something of a downtrend developing in the 200 period MA (the central blue line) but at this stage the big picture points to more of the same with boundaries likely at the -2.25 SD level and the 200 period moving average. More immediately though the -1.25 SD level of the 50 period moving average (the lower red line) still has us looking at a downtrend until it is broken.

This is the daily chart - and I think this is much more bearish. The difference between the daily and the weekly is that this is a very good example of a downtrend (but I doubt you needed me to tell you that). The reason why I make the point of that is that the 200 day moving average and it's volatility bands are all moving downwards and in a very consistent, almost parallel, direction with one another.

If you look at the -1.25 SD level of the 200 day moving average which is currently at 1.2677 you can see that price at its previous peak respected this line and then headed lower. If you look previously at price peaks and troughs you can see just how many times it has been respected previously - so it's a pretty important line. If we rally quietly over the next few days we may get into a situation where price meets both this level and the falling 50 day moving average which will likely make for some serious resistance and perhaps a good trade setup - this is the main this I will be looking our for in the Euro over the week ahead.

Unfortunately the 4 hour chart is about as short-term as I can get in this case because otherwise the spike in the rate just busts through everything. This one is still really relevant though. Note that the price broke the 200 period moving average but didn't close above it. I wouldn't necessarily say that this is a resistance level per se but more that the market is having a rest here while it digests what all this means for the immediate future. If price consolidates around this level and fails to break the high of today in the next few days that should give you an idea as to what the prevailing sentiment looks like.

All in all the news that was released today will come as a great relief because of the impact that it could have on the willingness to lend within the European region. Just by looking at the weekly, and especially the daily chart, you can see that the bias remains very much to the bear side and I think that we can expect to see a lot more back and forth in the near future. To finish on an optimistic note though we can take solace in the idea that the longest journey starts with a single step.