FXstreet.com (Barcelona) - The Euro starts the week holding its
ground around the psychological 1.30 level against a weak US
Dollar, still convalescent after being faced with a double negative
combo of news last Friday.
The disappointing US NFP data, which suggests there is still QE
ammunition by the Fed for quite some time, was only part of the
equation that explains the poor USD performance. the second more
overlooked element was the stack of big sell orders the USD index
had to face at the 83.50 junction, leading to magnify its losses
before the Friday's New York closing bell.
Looking at the USD index, Marc Chandler, Global Head of Currency
Strategy at BBH, sees "a break now of the 81.70-82.00 band would
suggest a deeper correction has begun that could carry it to around
As is well known, the Dollar Index is heavily weighted towards the
euro, so it is no wonder that technically, "the euro looks
constructive, with next upside target near $1.3115," Marc says.
However, the Euro, while technically better positioned capitalize
on ongoing USD soft tone, it will be facing some fundamental
problems of its own, likely to get in the way of the currency, thus
posing some challenges to enjoy a smooth appreciation.
One of the most pressing issues facing the Euro now is Portugal,
following the country's constitutional court decision last Friday
to reject some austerity measures from the 2013 budget.
Over the weekend, Portugal's Prime Minister Pedro Passos Coelho
said on Sunday the government will implement further cuts to
compensate the unexpected budgetary setback, so that it can meet
targets set by international lenders.
Moreover, the EU's economic affairs chief Olli Rehn said that
despite Cyprus is not any sort of test for other bigger countries,
large bank depositors may be affected in the future under the new
European Union law should a bank fail.
According to Valeria Bednarik, chief analyst at FXstreet.com, from
a fundametal standpoint, "there seems to be nothing that builds up
confidence in the common currency."
Some analysts like Marc Chandler, mentioned above, expect EUR/USD
to hit 1.3115 in the near future, although the context in which the
pair is developing its upleg, according to Valeria, "looks more a
short covering than Euro self strength", who also agrees that the
rally may extend until 1.3110, a key resistance.
Short term, adding the view of another renowned FX expert like
Chris Capre, founder at 2ndSkies, "the Euro momentum is up, but I
still hold a medium term bearish bias as I think this rally will
hit a wall and will find more sellers waiting above."
Chris sees "the first two key levels to rejoin the medium term
downtrend would be 1.3107 and 1.3260, with intraday bulls can look
towards the daily 20ema for potential longs, targeting those
resistance levels above."