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The euro advanced 175 pips against the dollar throughout the European and American session from a low of 1.3025 to break above 1.3150 and reach its highest level since February 25 at 1.3200. The pair was unable to break above 1.3200, but it remains around its highs at 1.3175, closing in consolidation mode.

The single currency joined a new wave of risk appetite on the back of better than expected corporate earnings and housing data in the United States, seemingly forgetting bad news on German Confidence and FMI GDP revisions. Equities also rallied on Tuesday, with Wall Street having its best day in 7 weeks.

The past week, the EUR/USD was consolidating above 1.3020 and below 1.3140, but today the pair had enough punch to break above the range. "What was interesting about the move was the lack of specific catalyst," comments BK Asset Management's analyst Kathy Lien. "The improvement in risk appetite even helped the euro shrug off the news that German investor confidence deteriorated significantly."

Lien believes that "it should be no surprise that 1.3150 is a key level in the EUR/USD and when it was finally broken, the currency pair jumped above 1.3180 in a matter of minutes." The BK's analy believes that if Wall Street jumps to new highs, "the EUR/USD could find its way to 1.33."

As for the short term and trading 1.10% above Tuesday's opening price, the pair is slightly bullish, according to the FXstreet.com trend index. Indicators such as MACD, Momentum and CCI are pointing north while the Stochastic is bearish in the 1-hour chart.

On the upside, the 1.3200 level stands as immediate resistance for the EUR/USD, followed by 1.3220 (50% fib retracement of the Feb.-April decline) and 1.3245 (Feb. 22 high), while on the downside, supports could now be found at 1.3115 (former resistance), 1.3080 (100-hour SMA) and 1.3030 (intraday lows/200-hour SMA).

The Bigger Picture

In the 1-day, bigger chart indicators are bullish, too. But UBS (NYSE:UBS) believes the pair will be pressured on data and German confidence. UBS still expects "EUR/USD to top out soon. In particular, the weak commodity prices should eventually support the USD." The bank sees EUR/USD closing Q2 at 1.28, Q3 at 1.25 and the year at 1.20 in a clear down trend.

Scotiabank agrees with UBS. Strategist Camilla Sutton states that the euro would find support in the near term by the ECB inaction and the ongoing QE programme by the Fed. "However, over the medium term, the combination of weak growth, low confidence, limited progress on the banking union and structural reforms should all weigh on the currency. We hold a year‐end target of 1.25," said Sutton.

Source: Forex: EUR/USD Tests 1.3200; Seems There Is Room For Further Gains