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It's been a frustrating last few weeks for market participants trading the EUR/USD as the pair has basically tracked sideways since April 9th. Although it is holding up better than some of the other currencies such as the Aussie and Canadian, the coming session could provide bears with plenty of excuses to take the pair below the $1.3000 support level.

According to Kathy Lien of BK Asset Management:

For EUR/USD, traders are itching for a reason to take the currency pair below $1.30 and for USD/JPY some traders are wondering whether $1.00 is an impenetrable barrier. For more on USD/JPY you can read the yen portion of our commentary, but overall we continue to think that it is only a matter of time before this resistance level is broken. As for the euro, a break of $1.30 hinges upon tomorrow's eurozone PMI numbers.

She went on to comment:

As we mentioned least week, the ECB has a history of preparing the market for major changes in monetary policy through a consistent shift in tone by policymakers. Bundesbank President Weidmann said the central bank could cut interest rates if new information warrants it. As a result, this week's eurozone PMI and German IFO reports will play a central role in setting expectations for ECB policy and help decide whether the EUR/USD maintains a break below $1.30.

Other analysts point to the economic recovery in the U.S., as well as recent events in Cyprus as reasons to expect further weakness in the pair. According to analysts at NAB Global Markets, "Our view is that the U.S. dollar is set for a multi-quarter period of relative strength against all the major currencies and has been predicated on ongoing and accelerating economic recovery in the United States, and a scaling back of QE at some point this calendar year." Furthermore they added, "After the debacle of the Cyprus bailout and implications it may have for future bank resolutions, the European economy is again in focus."

Many seem to be waiting for the new range to be established before taking positions. Both short-term moving averages and momentum indicators are in neutral set up which is typical in a market that has been lacking a strong trend. "EUR/USD is still trading in a sideways direction and it will need to break outside of its $1.3000/$1.3150 consolidation range in order to generate fresh momentum," noted Sean Lee of FXWW.

A move below the $1.3000 support level could lead to further selling down near the $1.2900 (bullish engulfing candle on weekly chart from January 2011). Below here the next major support sits at the neckline ($1.2780) of the weekly head and shoulders pattern which appears to be in the process of completing the right shoulder. A weekly close below the neckline would have bearish implications and sets longer-term measured move targets all the way down near $1.1900. First resistance remains at $1.3074 (the 9 day ma), followed by $1.3140 and $1.3180 (top of trading range)

Source: Upcoming Economic Data The Catalyst For EUR/USD?