The weakness seen in the euro on the back of downgrade of France by Moody's was short-lived, and the shared currency has already managed to erase those losses and trades little changed at the 1.2800 area versus the dollar.
In tandem with euro hesitation, European markets and Wall Street indexes trade mixed as investors wait for the outcome of today's eurozone finance ministers meeting, where issues to be addressed include how to fill Greece financing gap and the timing and size of the disbursement of the next tranche of Greek aid.
"Comments heading into today's meeting are generally hopeful, and even if a formal decision to release funds is not reached today, ministers could reach a consensus on the key parameters of any deal", says the Wells Fargo analyst team. "Accordingly, we see the eurozone finance ministers meeting as a market-positive rather than market-negative event, with some potential for the euro and other foreign currencies to move higher today".
The other main event today is Fed Chairman Bernanke's speech at the Economic Club of New York. "Should any of Mr. Bernanke's comments hint at further policy easing once the Fed finishes Operation Twist, that could also support a bias toward U.S dollar weakness and foreign currency strength in today's FX trading," Wells Fargo adds.
Euro gravitating around 1.2800
The EUR/USD bounced from a low of 1.2764 and reached a fresh 2-week high of 1.2828 at the beginning of the New York session, although the cross lacked momentum and pulled back to the 1.2800 comfort zone. With short-term indicators holding the bullish tone, the pair has scope to rise to the 1.2840 area and even 1.2900. On the downside, 1.2765 should offer support.
According to the TD Securities team, yesterday's late day downgrade of France by Moody's didn't seem to mean much to the EUR as an initial slide has now been fully retraced. "A close above the 200-DMA today (currently 1.2806) would be key for a signal of further strength", they explain. "The single currency is currently trading right near that level, but the outcome of the Eurogroup meeting on Greece today will likely see it decently above or below that level."