The bloc currency is extending its march north in the present week, following yesterday's pronounced up-move to the key mark at 1.3200, printing 6-week highs at the same time. However, is seems the upside lacks the vigour in prolonging the correction further, as no catalyst are arising in the horizon so far. On the contrary, it seems that EUR/USD fate is almost uniquely bonded with risk appetite trends, thus ignoring the horrible fundamental background of the euro area.
… ECB, PMIs … anything else?
It is surprising the laissez-faire attitude from the ECB, putting increasing distance between its faculties to solve EMU problems (or intentions at least) and the sovereigns themselves, cutting them loose to face the increasing social unrest stemming from more and more austerity measures, for instance. Nothing, not even (encouraging) words by President Draghi. In the meantime, the urgent and vital issue of the supervisory role by the ECB continues to be in a laboratory phase, despite whatever comments by the central bank officials. No progress has been made thus far, just empty announcements.
As such, in the very near term, next week's preliminary results from the manufacturing and services PMIs would threaten the recent upside in the cross, as market participants are almost ruling out any improvements from both sectors in the core and periphery. Hence, Draghi's prediction of a recovery by the second half of the present year would have to wait a little bit longer, if it eventually emerges during 2013.
All in all, risk appetite and the situation in Italy over the next couple of days, where a new President should be elected, are posed to drive the near-term price action of the cross.
From the technical perspective, the euro quickly left behind the 100-day moving average around 1.3150 hitting the key resistance at 1.3200 on Tuesday. Should the upside picks up pace again, the interim resistance is located at 1.3230 (50% Fibonacci retracement of February-April slide), en route to the up-channel resistance at 1.3307 and then 1.3319 (March 25th highs).
On the downside, the first relevant support sits at the psychological mark at 1.3000 ahead of the key 200-day moving average at 1.2900/10.
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