The U.S. dollar trades are little changed versus major competitors on Monday as the market takes a breather to assess the NFP figures published on Friday and Draghi's speech that followed the ECB meeting. However, commodity currencies are outperforming, accomplishing solid gains versus the dollar despite subdued Chinese data.
The euro continues to oscillate around 1.3000 showing lack of determination, while the USD/JPY holds near a 3 ½-year high above 96.00. The pound managed to recover from a fresh 32-month low of 1.4865 and trades little changed on the day around 1.4910. U.S. stocks reversed earlier losses and turned positive.
"Markets still seem to be looking for some stronger directional signals in a number of majors-and the EUR is perhaps providing the most mixed messages", says the TD Securities team. "After Draghi downplayed the discussion on rate cuts last week, it seemed like the EUR could be staging a turn around. But then we saw the very strong U.S. employment report that muddied the waters somewhat for EUR/USD. We have turned more neutral on the EUR for the moment, but this week's theme may come more from USD sentiment".
Euro recovers but remains vulnerable
Technically speaking, even though short-term indicators show the outlook has improved for the EUR/USD, longer-term bias remains bearish. The pair set a low of 1.2955 in the wake of the NFP report, but failed to move towards the 1.2900/08 area (psychological level/ Fib 76.4% of 1.2660/1.3710), which is the cross' next bearish target.
On the other hand, EUR/USD has initial resistance at 1.3100/30 followed by 1.3160 (Feb 28 high), above which pressure could ease.
"A break below 1.2950/60 should be a good signal that EUR/USD makes another leg lower, while a climb above 1.3120/30 would be a strong signal that the single currency is turning around", says TD Securities.
Meanwhile, the UBS analyst team sees potential for further losses given the strong US jobs report. "For the coming weeks we see potential for further drop in EURUSD, as markets will start to price in a stronger momentum in the U.S. economy", UBS concludes.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.