The shared currency remains entrenched at the lower end of yesterday's spectrum thus far, still shaken by the grim comments by Bundesbank's J. Weidmann on Wednesday. Renewed concerns about the eurozone growth prospects are weighting on the EUR/USD as well, undermining any upside attempt in the very near term. So far, the market is closer to breaching the 1.3000 level than piercing the 1.3400 upside barrier - an idea though unthinkable two days ago.
… Resuming the bearish trend
The longer the demand for euros keeps the cross around the current levels, the more confirmed is the fact that recent highs in the vicinity of 1.3200 represent a top in the near and medium-terms.
The G20 gathering that kicks in today would be a priori nothing that euro traders should pay close attention to, despite that the recent depreciation of the Japanese yen alongside the new QQE programme ignited by H.Kuroda and Co. would be in centre stage.
The developments in Italy - or the tip of the iceberg - remain so far ignored by the markets albeit they should grow in relevance towards the weekend, when a new president should be appointed. That would be the first step in order to gather consensus for a coalition government, however its occurrence is far from guaranteed. Should the political deadlock linger, fresh elections would be called increasing even more the uncertainties surrounding the third economy of the bloc, a front better to not be bypassed by the markets.
In addition, further downside pressure emerges from next week's manufacturing and services PMI results in the euro area, as improvements in both sectors would remain neglected for the time being (2013?), according to the market consensus and markets' reality.
When it comes to technicals, the cross is navigating below the uptrend channel support set from April lows.
Should the bull run reignite, the first hurdle would be the area of 1.3085/1.3120, where converge the channel support line and the 38.2% Fibonacci retracement of the February-April decline. Further impulse would then target 1.3201 (April 16th high) ahead of 1.3225/30 (50% Fibonacci retracement).
On the flip side, the psychological mark at 1.3000 should contain the initial selling wave ahead of the 200-day moving average at 1.2920/25.