FXstreet.com (Barcelona) - The euro-bulls' stampede was well
contained by the strong resistance in the vicinity of 1.3300 after
the US economy has averted the so-called 'fiscal cliff'. The
subsequent exponential increase in the risk appetite was directed
to the single currency first hand, although its direction has
changed soon after the opening bell in London, where stocks and
other risk associated assets took the relay, exposing the euro's
lack of solid arguments for prolong the upside to levels beyond
1.33. This trend has been accentuated after poor manufacturing PMI
prints in the core members of the bloc.
… There are no blind people, only blindness
The huge wave of risk appetite seems to bury everything that stands
up on its march, it possesses the ability to make traders forget
about the reality that the euro zone, for instance, is now living
with, and even worse, what lies ahead. Camilla Sutton, Chief
Currency Strategist at Scotiabank, expects the euro to decline to
1.27 towards the last quarter of 2013. Of course, million things
could and will happen until that period arrives, but at least there
is a hint of truth. The euro, per se, lacks the arguments and the
solidness to sustain a firm ascent towards recent highs, let alone
to attempt to reach levels even close to the 2011 highs.
Therefore, EUR/USD would look to the other side of the coin when
looking for catalysts or excuses to justify occasional upsides: the
US dollar. However, the greenback is expected to strengthen this
year, starting with discussions about postponed spending cuts and
the debt ceiling within the next six to eight weeks, and all
against the backdrop of a firm recovery in the US economy, which
would be supportive of a stronger greenback.
When comes to technical analysis, Karen Jones at Commerzbank
believes the cross has reached some sort of small top in the short
term, indicative of a further pullback towards the key area around
1.3000. "Ahead of here lies 1.3061 (38.2% retracement) and the
1.3019 2 month support line. To confirm that the market has topped
here we will need a close below the 1.2930 2012-2013 uptrend. We
note the divergence of the weekly RSI and this does suggest caution
in the up move".
… NFP on the horizon
Today's weekly report on the US labor market and the ADP Employment
Changed will be closely watched by the investors, ahead of the FOMC
minutes due in the European evening and more relevant, the Non farm
Payrolls due tomorrow, where a better-than-expected reading might
add extra selling pressure to the cross.