The euro advanced versus the dollar after the Federal Reserve announced its new U.S. Treasuries purchase program, but lacked momentum to break above the 1.3100 psychological level.
In Europe, finance ministers agreed that an ECB supervisor of the region's banks should be operational by March 2014, while eurozone finance ministers also approved the release of €49B in funds to Greece through March.
Despite the generally positive mood, the euro has struggled to move higher and instead it entered in a consolidation phase. EUR/USD barely reacted to the latest string of U.S. data, while Wall Street indexes remain nearly flat as focus returns to 'fiscal cliff' talks.
Euro fails at 1.3100, positive bias persists
So despite having made 3 attempts within the last 24 hours, EUR/USD has been unable to overcome the 1.3100 psychological level. Should the pair pierce the 1.3100 mark, it could easily reach the 1.3170 area, (September's double top) within the next sessions.
On the downside, loss of the 1.3030 support area, could see the pair slide back to the 1.2980 region. Below this latter, bullish potential would ease, leaving EUR/USD vulnerable for a retest of 1.2900. Nevertheless, uncertainty regarding the fiscal cliff could prevent investors to take big bets at this point, leaving EUR/USD confined to its 1.2660/1.3170 range, where it has traded since mid-September.
"On the daily chart though, EUR/USD's recent buoyancy looks rather constructive", says the TD Securities team. "Notably, 1.3125/30 marks the neckline of a head & shoulders continuation pattern, the break of which would imply a four big figure move higher, toward 1.34/1.35".
However, Nick Bennenbroek, Head of Currency Strategy at Wells Fargo Bank thinks that a period of correction could be ahead. "Despite the flurry of activity, foreign currencies have struggled to move significantly higher, suggesting a period of corrective foreign currency weakness may not be far away", he commented.
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