What Can't Go Up ...

Includes: FXC, FXE, UDN, UUP
by: FXstreet

After enjoying some risk appetite during the last sessions, investors turned cautious favoring USD gains across the board. The euro failed to extend its recovery above the strong 1.3160 resistance area and pulled back, also weighed by mixed eurozone economic data.

The pound and the yen trade virtually unchanged against the USD while the Loonie is among the worst performers, weighed by domestic data. The AUD holds onto gains, but off daily highs. U.S. equities trade with small gains after Wednesday's surge, while gold fell below $1600 an ounce.

In the macroeconomic domain, U.S. Q4 GDP was revised into positive territory as expected, but the increase was just 0.1% and fell short of the 0.5% growth expected. Meanwhile, initial jobless claims dropped to 344,000 in the latest week.

"For now FX market sentiment remains somewhat uneasy and our bias remains for further foreign currency weakness in the near-term", says Nick Bennenbroek, Head of Currency Strategy, Wells Fargo Bank.

Euro fails to sustain gains, slide back below 1.3100

The recovery of the euro against the dollar stalled at the 1.3160 area on Thursday where a congestion zone converges with the 50% retracement of this week's decline between 1.3298/1.3017. Failure to break above this technical level, put the EUR/USD back under pressure during the New York session. Having set a daily low of 1.3057, the pair has scope for further losses with 1.3017 as next support area, followed by the 2013 low at 1.2997. A break below this latter would encourage bears and could drag the pair towards 1.2950.

On the other hand, the EUR/USD would need to regain 1.3160 as a first step to ease the immediate pressure. However, at this point the pair seems biased lower and the correction might be short lived in the absence of fundamental triggers.

"From a technical point of view, the EUR looks like it could see a rebound in the coming days, but the broader trend is still bearish for the weeks ahead", said the TD Securities team. We continue to see rallies as selling opportunities".

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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