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The EUR/USD traded in consolidation mode following the latest bullish movement, which drove the pair to reach a seven-month high at 1.3185. On Monday, the pair has been pricing in a tight range between 1.3155 and 1.3165.

The U.S. session experienced a visible risk appetite, with U.S. stocks rallying the first day of the week on a jump in the financial and housing sectors. Comments from Republican House leader Boehner helped to boost sentiment as he indicated a willingness to raise tax rates for households earning more than $1 million.

Early in the morning, ECB president Mario Draghi stressed that the situation in the area remains difficult and that "the medium-term outlook for economic activity remains challenging." He stated, however, that growth should return in the second half of 2013, thanks to an increase in exports and a stronger global demand.

The result was the EUR/USD trading at the 1.3160 area, virtually unchanged since opening. As for technical levels, on the upside, if the EUR/USD manages to break above 1.3185, next resistances are seen at 1.3200 (psychological level) and then at 1.3285 (May 1 high). On the downside, immediate supports could be found at 1.3145 (intraday low), 1.3120 and the 1.3100 mark.

The bias remains positive with an Euro at 7-month highs

With little volume around this Monday, "the hourly chart shows indicators flat in neutral territory as price hovers around and also flat 20 SMA, giving no clear clues on short term direction," comments Valeria Bednarik, FXstreet.com analyst. "In the 4 hours chart, technical readings are also lacking direction, yet as long as price holds above the 1.3125 static support level, the upside is favored, with a break of the mentioned high pointing for and advancing towards the 1.3250/80 price zone."

The TD Securities team comments that "the daily close above the neckline of the head and shoulders continuation brings a target in the upper 1.35 area, while the weekly close implies a target closer to 1.43/44 in the months ahead."

Along the same line, the UBS analyst team holds a bullish view on EUR/USD. "With the closing break above 1.3150, the risk is now for extension of the strength to 1.3284 and then 1.3491," they comment. "Support lies at 1.3041."

Source: Forex: The EUR/USD Closes Above 1.3160 On A Consolidation Day