Not so fast! After falling to 2013 lows at 1.2910 on Thursday, the EUR/USD has been trading on recovery mode to reconquer the 1.3000 position and advanced to test the 1.3100. Finally, the EUR/USD closed the week at 1.3070, around 70 pips, or 0.75% above Monday's opening price.
It was the first positive week after three negative weeks, and the EUR/USD has turned positive on the monthly chart after the February collapse. "The euro has remained above the $1.30 level for the first time since March 5 and only the second time this month," points out BBH analyst Marc Chandler. "The next corrective target is in the $1.3100-30 area."
"The bias here has switched to bullish with the recent break above 1.2990 resistance and my outlook is positive, for a rise through 1.3070, en route to 1.3160 zone," wrote Deltastock.com analyst Stoyan Mihaylov, pointing to initial support at the 1.2980-90 breakout level.
It would be premature to say that this last price action in fact represents a change in the wider frame, which remains bearish so far. Still, there is a long way up to change the current stance in the euro, and of course, it must be accompanied by a parallel improvement in the economic fundamentals and a more solid and foreseeable political scenario in Italy, for starters.
Nomura Strategist Saeed Amen thinks that the EUR/USD is holding a bearish outlook in a purely technical picture. Looking at his daily chart he writes, "RSI has reached levels where, in recent weeks, spot has peaked. Also 20D SMA looks like an important resistance on the topside, which has barely been tested. With bandwidth falling, spot is likely to range. Hence, a retracement lower within the range seems most likely. Our target is 1.2900 (above 200D SMA)."
However, the BTMU states that the EUR/USD keeps neutral bias in the middle term, and they see the spot moving between 1.2800 and 1.3150. "Coming so soon after the semi-annual testimony to Congress, we probably won't have any dramatic change in stance from Bernanke, but nonetheless, it will be a valuable opportunity for the Fed to emphasize that despite some stronger than expected data, the need for monetary stimulus will be continue for some time yet."
According to the FXstreet.com EUR/USD Forecast Poll, the sentiment for the euro is stabilizing in the 1.30 range, with the 1.3079 as a 1-week target, 1.3053 as a 1-month and 1.3020 as a 3-month forecast. In this line, the FXstreet,com contributors' positions have a majority of buy orders, as the Current Trading Positions table showed on Friday
In any event, and although the U.S. job market has picked up, Danske Bank expects "Ben Bernanke to argue that full−on recovery is still some way off -- as is any tightening of monetary policy." As Katarzyna Komorowska from FXstreet comments, "February Nonfarm Payrolls figures surprised to the upside and the unemployment rate fell to 7.7%, its lowest post-crisis level, but still far from the 6.5% objective established by the FOMC, which would allow it to exit the QE program." Therefore, Komorowska concluded, "at the March meeting, status quo should be maintained."
The Week Ahead
Moving forward to Monday, a second-tier docket in the euro area would be a priori insufficient to trigger a significant move in the cross, as Italy and the EMU would publish their trade balance figures. Across the pond, the only release will be the NAHB Housing Market index.
The rest of the week, the FOMC meeting, the BOE minutes and the UK budget, the beginning of a new BOJ regime and euro area flash PMIs will catch the market's attention.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.