FXstreet.com (San Francisco) - After reaching its 11-month highs
at 1.3403, the EUR/USD traded slightly down to 1.3340 reached in
the American morning to recover and close Monday at 1.3380. The
Euro is 0.12% higher on the day.
Following the 1.3400 test, the EUR/USD lost momentum and weighed by
disappointing eurozone data it pulled away from highs. However,
with the downside pretty much restrained, the shared currency
entered in a consolidation phase.
In the short term, next resistance at 1.3487 (2012 high Feb.24)
ahead of 1.3491 (50% of 2011-2012 decline) en route to 1.3550 (high
Dec.2 2011). On the opposite side, a drop beyond 1.3336 (low
Jan.14) would target 1.3249 (low Jan.11) and then 1.3192 (MA21d).
According to FXstreet.com analyst Richard Lee, there are three
things bolstering the EUR/USD higher: The ECB's rate cut no longer
an option, the EUR/CHF pullback and the 1.3300 technical violation.
"Now, with pivotal resistance at 1.3300 broken to the upside, the
next resistance test for EURUSD will be the 1.3511 50% fib
resistance barrier," affirms Lee.
TD Securities' analysts Shaun Osborne Greg Moore agree with Lee.
The "1.33 should now be a key pivot point, and we expect dips
should be rather shallow now on the trek toward 1.35/36 in the
coming weeks." They wrote added that the EUR/CHF should benefit
from this upside, already reaching a new high since December 2011.
"Although today's market activity is consolidative in nature, there
are no immediate events that look likely to halt last week's more
favorable market sentiment and foreign currency gains, and our
outlook is for some further slippage in the U.S. dollar over the
near-term", said Nick Bennenbroek, Head of Currency Strategy at
Wells Fargo Bank.
In the same line, UBS analyst team considers that the EUR/USD may
overshoot long-term targets in the near term. EUR/USD at 1.3350/70
is close to the UBS year-end forecast of 1.34 while EUR/CHF and
EUR/JPY are also close to the 12 month forecasts (1.23 and 121).
"Nevertheless, the exchange rates may well overshoot our long-term
targets in the near term, as the need to cover short EUR positions
is high", says the UBS team.
The day ahead
Tuesday's docket in the euro area will kick in with the German
inflation figures, followed by an annualized measure of the GDP in
the first economy. Italian CPI will follow, ahead of a key 12m and
18m auction of Spanish Letras. EMU trade balance figures will close
the data front.
Investors must pay attention to UK's CPI, PPI and retail price
index with its BoE inflation report. In the US, the Retail Sales
will be the event of the day with the NY Empire State Manufacturing
Index, the business inventories and the PPI catching attention.
However, from now onward, the debt ceiling debate will focus the
market attention as the fiscal cliff did in the past. Specially
since Ben Bernanke and President Obama speeches and the Geithner's
letter to Congress saying that even brief default would be
damaging, he expects to hit debt ceiling between February and