The 1.3000 level is "a hard bone to break" for the EUR/USD stated FXstreet.com's Chief Analyst Valeria Bednarik. And market could assume that following the Greek debt buyback fulfillment, Spain and Italian yields going down, Stocks posting gains in both side of the Atlantic and market assuming the FED will extend QE tomorrow, the EUR/USD would rally fast and furious. But Not, It didn't.
Risk appetite has been boosted further following the U.S. open as investors where speculating that the Fed could signal more aggressive quantitative easing in the near term. The greenback was pressured on it but the lack of progress in negotiations about the U.S. "fiscal cliff" has kept agents sidelined in recent weeks, preventing FX crosses to show decisive moves.
Meanwhile, the GBP/USD conquered the 1.6100 position, the AUD/USD jumped above the 1.0500, the Dow Jones printed its 5th positive day in row. But in the EUR/USD field, movements weren't significant.
And why should it? "The ECB considered negative rates in its last meeting, and that should sum it all up: a strong euro is not good business to anyone in Europe," comments Valeria Bednarik. "And while the dollar is far from strong, if market sentiment turns against the greenback, won't be the EUR the one to outperform among majors."
The EUR/USD managed to break the 1.3000 level but it failed to extend gains above it in a satisfying way as the 1.3000 level seems to remain as an important contention level. From a technical view, as short term picture remains positive, a decisive break above 1.3000 could led the pair toward the 1.3020/30 zone ahead of 1.3070. However, repeated failure here could see the EUR/USD slid back to the 1.2900 area.
While yesterday we noted that City Index Chief Global Strategist Ashraf Laidi expected the "EURUSD to rebound towards 1.32, followed by $1.33-34 nearing December." And even suggesting that a H&S formation makes the $1.38-40 as viable target in by end of Q1 2013." Today we commented that the Scotiabank sees "EUR to trend lower in 2013, expecting it to close at 1.25."
Camilla Sutton, Chief Currency Strategist at Scotiabank, remarks both the FOMC and the EU Summit meetings have the potential to weight on the cross. "Beyond the all important FOMC meeting on Wednesday, the end of week EU leaders summit will be important." As the "focus will be on negotiations over the banking union."
The FOMC-Day Ahead
As for tomorrow, the whole investing industry will pay attention to the last FOMC meeting before Christmas. According to FXstreet.com analyst Richard Lee, "three likely outcomes follow tomorrow's meeting, with all including a likely stay on rates, no rate change with: 1) $45 billion a month in Treasury purchases. 2) No rate change, more than $45 billion a month in Treasury purchases. and 3) No rate change, no increase in monthly Treasury purchases.
The FOMC schedule is as follow:
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