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The EUR/USD found some generous Easter bids around the $1.28 level on Monday-thinned markets, surging as high $1.2875 in the last Asian session. The exchange rate is now simply adjusting its value following the intense selling pressure from early last week, where the Cyprus drama took center stage.

With all institutional trading desks in Europe and in the U.S. back to business as usual, retail traders should expect the price activity to pick up, with the main focus starting now to shift from Cyprus to Italy, where the political gridlock continues irreconcilable. Another theme to keep an eye on will be Spain, after the government revised down its 2013 GDP forecast to -1.0% Monday, from an initial -0.5, or what is essentially a 100% deviation on its projection.

In the calendar, the European morning presents the final eurozone PMI numbers, although no major revisions are expected. However, as Kathy Lien, co-founder at BKAssetManagement notes: "The big focus for the euro this week will be the European Central Bank's monetary policy meeting, where the ECB is widely expected to keep monetary policy unchanged but with German data weakening and Cyprus requiring a bailout, the ECB could be warming to the idea of additional stimulus."

Kathy says that this time around, Mario Draghi may sound more prudent on his words, "which would be negative for the euro."

Technically speaking, by looking at the EUR/USD chart, there is still little indication that the rate is ready to undergo a major recovery. Instead, the main line of thinking among some experts seems to be looking to sell on potential supply areas. At FXstreet.com, we identify a potential one today at $1.2940, also intersection of the 20-day MA.

Chris Capre, founder at 2ndSkiesForex, notes: "The euro still remains in a medium -term downtrend, and has yet to close above the daily 20 ema, along with the dynamic resistance above, but short-term suggests some bullish underpinning, which is fine with us. Until I get a daily close above the 20 ema, I'll look to sell on rallies and view this as an opportunity to short it on the cheap. Thus, watch for corrective rallies between $1.2933 and $1.2951 to rejoin the downtrend, targeting $1.2775 and $1.2675."

In the opinion of Valeria Bednarik, chief currency analyst at FXstreet.com: "The pair's bearish trend remains, while indicators retreat toward their midlines. In the 4 hours chart, technical readings turn lower, still in positive territory, with the $1.2790 area now as the level to break ahead of a downward continuation."

According to Fan Yang, CMT, chief analyst at FXstreet.com: "With price still under $1.29, the bearish outlook still remains intact with room toward the next key support in the $1.2660-$1.2680 area, which includes support factors: 1) a 61.8% retracement and 2) November support pivot. A break above $1.29 can start to introduce further a near-term relief rally."

Source: EUR/USD Adjusts Value Within Bearish Context