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The single currency seems to have left behind its post-Draghi depression, finding a bottom in the area around the mid 1.33s and is now looking to extend a bull attempt beyond the key resistance at 1.3400

… Congestion likely to follow

Ahead in the week, however, the euro docket would not has the potentiality to greatly affect the euro price action, as the key releases will be the ECB Monthly Report and the preliminary figures of the EMU GDP for the fourth quarter of the last year.

On the opposite direction, the major catalysts the market participants are looking for in order to give the market a clearer direction, lie in the political arena once again.

In the very near term, today's Eurogroup meeting would be the main source of any development, although the main debate amongst attendees would circle around the rescue package for Cyprus, Greece - which has been surprisingly quiet - and the recapitalization of the EU banking sector.

Extending the horizon further, the Italian elections in late February could pose an initial serious threat to the shared currency. Although last polls would be pointing towards a victory by the Democratic Party leader Pier Luigi Bersani, he should "share" the government with the incumbent PM Mario Monti. However, the recent advance by former PM Silvio Berlusconi and the comic-became-politician Beppe Grillo should be taken well in consideration, as there is still time for them to get even closer, especially as Bersani's lead is far from unreachable.

In addition, the bloc currency is posed to face further pressure via the greenback, as we approach the March 1 deadline, when the 'sequester' is meant to start, triggering automatic spending cuts all over.

At the moment, the EUR/USD is navigating between the 50% and 38.2% Fibonacci retracement of the move from year lows around the 1.30 figure on January 4 to tops so far in the vicinity of 1.3710 on February 1, at 1.3353 and 1.3437, respectively. Although the case for further upside could be less likely now, we find than the initial level to watch at 1.3437 (38.2% Fibonacci) ahead of 2012 highs around 1.3485 and followed by the 23.6% level at 1.3543. On the flip side, the next stop south sits at the 1.3270 region (61.8% Fibo and 55-day moving average), exposing the 6-month trend around 1.3160/65 if breached.

Analyst Karen Jones at Commerzbank also suggests "We target the 1.3270/56 zone near term, which we suspect will hold the initial test. This is the 16th Jan low and the 61.8% retracement, however there is potential for a slide back to the 1.3228 3 month support line".

Source: Lack Of Conviction Prevails Around The Euro