The single currency remains glued to the psychological limestone of 1.3000 at the start of the trading week, still digesting last Friday's stronger-than-expected U.S. NFP that dragged EUR/USD to fresh 2013 lows in the vicinity of 1.2950, erasing the post-Draghi gains.
… 1.3000 to prevail for now
The euro docket for the week ahead lacks appeal, and thus the chance for any break of the prevailing dullness around 1.3000 would likely be postponed. Taking the euro area as a whole, fireworks shouldn't be ruled out however when considering the annualized unemployment rate during the last three months of 2012 and February inflation figures, expected to ease further over the last twelve months. The ECB Monthly Report would also be in the limelight, although its capacity to weight on the euro is scarce at the moment. The weekly report on the LTRO's repayment figures has lost attractiveness after the very first one, falling into the publication of mere informative figures since.
The disconcerting political scenario in Italy continues to be in the centre of attention following last Friday's downgrade of the domestic credit rating by agency Fitch to BBB+, keeping the negative outlook. There is yet no news that encourages investors to think that the formation of a new government, whatever its colors, is on the horizon. Comments from on party lead to counter-comments from the others, and so on, netting zero advances. Furthermore, this situation is posed to stay now longer than expected, representing a heavy anchor for the euro to the current levels.
The U.S. recovery is another hurdle euro traders are facing, even tougher after last NFP figures demonstrated that the U.S. labour sector created 236k new jobs during February, following a solid reading from the U.S. private sector and crushing both expectations and previous print. However, the improving trend in American employment would face the lagging specter of the "sequester", expected to show its impacts in the upcoming months. In the same direction, the FOMC's dovish tone, expressed by recent testimonies by Chief B.Bernanke and comments by Vice Chair J.Yellen, would remain a firm barrier for USD bulls so far, as the ongoing QE programme would not be halted, let alone canceled, until further and more solid evidence of an improvement in the labor market is shown.
Technically speaking, the cross continues to navigate within the down-channel set from 2013 highs above 1.3700. The interim support lays at 1.2956 (2013 lows March 8th) followed by 1.2940 (200-day moving average). A breach of the latter would accelerate the decline towards the area around 1.2880/85, where converge the 50% Fibonacci retracement of the July'12 - February'13 up-move and December lows. Longer-term, the area of 1.2680/90 (November lows, 61.8% level and bottom of the channel) would contain further pullbacks. On the upside, the first barrier comes in at 1.3076 (38.2% retracement), ahead of 1.3135 (high March 8th) and then the area of 1.3160/85, home of the 100-day moving average and the top of the channel.