FXstreet.com (San Francisco) - Disenchantment is the word of the
day. After hitting the highest level since April 4th at 1.3310, the
EUR/USD turned lower and retraced all of its intraday gains,
weighed by US President Obama threaten to veto Republicans' plan B
in negotiations to avoid the 'fiscal cliff'. The situation was
similar in stocks, with the major indexes closing with red numbers.
Speaker John Boehner defied President Obama and said the House of
Representatives will pass a budget proposal that Barack Obama had
already threatened to veto. It made a clear picture about the
impending fiscal cliff's talks and the disenchantment situation.
However, the setback of the euro versus the dollar was contained by
the 1.3200 zone and the pair has spent the last hours in a pretty
tight range just above the mentioned support.
As sentiment continued to improve in the Eurozone, FXstreet.com
Chief analyst Valeria Bednarik, believes that the EUR/USD may see
some limited bearish correction, "more on profit taking and extreme
readings rather than anything else."
As for the short term, below 1.3200 next supports could be found at
1.3185 (Dec 17 high), while on the upside resistances are seen at
1.3307 (intraday high), 1.3350 and 1.3385 (Mar 27 high).
Knocking the 1.3300 doors
Investors seem to have forgotten all about the eurozone debt crisis
and shifted their attention to the US budget negotiations, which
have been driving price action lately. But According to FXstreet.co
analyst Richard Lee, the IFO, ECB and Greek bond status support the
EUR/USD Surge. Lee states that "any short term correction is likely
to see formidable support at 1.3181."
According to the TD Securities team, market worries about the
'fiscal cliff' may not pick up until the end of the week. "Provided
we don't get a fiscal cliff shock, a persistent grind higher looks
to be the most likely scenario, which could see EUR/USD in the
upper 1.35 area in the next few weeks", they commented.
City Index's analyst Ashraf Laidi was one of the initial bullish
experts on the unique currency, as he expects the "EUR/USD to
rebound towards 1.32, followed by $1.33-34 nearing the end of
December." Laidi states that "the ensuing reverse Head and Shoulder
formation appearing in EUR/USD is a classic (and rare) bullish
formation, with clear delineation of: i) required preceding
sell-off; ii) isolated low, creating a left shoulder; iii) a
renewed sell-off to create a bottom or a head; iv) subsequent peak,
creating a right shoulder; and v) a straight neckline coinciding
with trendline resistance."
"The theoretical target interpolated from the reverse H&S
suggests $1.38-40 is viable in by end of Q1 2013," adds Laidi.
The day Ahead
Now that the Japanese lower house elections are over, trader focus
is being placed on the Bank of Japan's monetary policy decision.
"This decision will be important one for the underlying currency,"
points Lee, "which continues to lose against the US dollar."
According to the Lee, if BoJ goes for further monetary easing,
investors should expect the USDJPY to surge higher towards 85.50 in
Other events that investors must follow are Jobless claims,
Existing homes sales and the Conference Board leading index in the
United States. In Europe, Uk Retail Sales and the European Systemic
Risk Board Meeting.