FXstreet.com (San Francisco) - Is the Euro a basket case or is
it the Dollar? After hitting a 2-month low of 1.2660 on Tuesday,
the euro managed to stage a recovery and to post intra-week high at
1.2800 on Thursday, but pair was slapped again and launched to the
1.2700 area. However, too many movements across the week to just
close around 20 pips above previous weekly close at 1.2740.
The Euro has posted its first positive weekly close against the
Dollar in 4 weeks and with the former bottom of the range at 1.2800
acting now as resistance. The downside remains vulnerable for
EUR/USD.
According to the Experts, Banks & Independants' FXstreet.com
Forecast Poll, the bearish continuation for the euro is the common
bias among polls participants, but there is a strong level to break
at 1.2700 area if bears want to go further.
As for the short term, "the hourly chart shows price broke below
the ascendant trend line coming from 1.2660 and remains now limited
by 12740/50 Fibonacci area," comments Valeria Bednarik from
FXstreet.com. "Immediate support comes around 1.2710/20 area, while
bigger stops are lined below 1.2690 area. Only below bears will
regain full control of the pair."
Touching more macro-economic and fundamental things and following
days of concerns, "very constructive" talks regarding the US
'fiscal cliff' between President B.Obama and the Congressional
leaders have acted as support for the upbeat momentum in the stock
markets.
In this line, the US dollar hinges on key issues: Higher taxes, a
reduction in-deductions and a reduction in spending. "These key
points are likely to keep both sides far apart on the bargaining
table, extending the debate and bringing the world's largest
economy closer to the activation of the fiscal cliff," comments
FXstreet.com analyst Richard Lee. "The sentiment will weigh on
dollar bulls, especially against the European Euro. Although the EU
is still in the midst of a financial debacle, bearish effects from
the US fiscal cliff will likely trump Euro pessimism."
Nevertheless, TD Securities analysts believe that the EUR/USD is
trading more on technical than fundamentals. "Considering that the
single currency managed to move higher yesterday in the aftermath
of the confirmation that it is in an official recession, we are
clearly in an environment where fundamentals have taken a back
seat", they wrote, eyeing Tuesday's low of 1.2662 as support and
expecting the 200-day moving average, near 1.2810, to act as
resistance.
But on the other side, the Wells Fargo team argues that given the
mixed nature of recent FX trading, currency markets will likely
remain reactive to headlines. "While we don't have a strong
directional view, we are more inclined to downside rather than
upside for most foreign currencies over the near-term", they
say.