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A fairly quiet start to the new week has left the euro little changed as North American traders return from the weekend. Even though the shared-currency managed to erase intraday losses versus the dollar, it remains trapped in a range roughly between 1.2800 and 1.3170 since mid-September.

Today, euro and stocks benefited from reports that Spain is closer to an official request for aid, and rumors that Greece could get the extension to its bailout terms along it has been looking for. In the U.S., the latest string of data also supported the positive mood. U.S. retail sales climbed more than expected in September, while manufacturing in the NY region improved but remained in contraction territory in October.

Looking ahead, the bigger market mover is still likely to be headlines out of Europe.

Euro remains rangebound, EU summit unlikely to provide a catalyst

As another week begins, the euro continues searching for a catalyst that helps it to break its range. Market's focus will probably be in the Oct 18-19 summit of European Union leaders, although it is unlikely to provide a resolution of numerous outstanding issues, including Greece, Spain and Cyprus. Hence, in the absence of any real developments out of Europe, the EUR/USD will likely remain a range trade in the short-term.

EUR/USD was last flat at the 1.2950 area, recovering from a low of 1.2891 and capped by 1.2980 on the upside. The 1.3030 area continues to be key as a break above could quickly take the pair to recent highs around 1.3070.

"The overall structure of the EUR/USD has turned into that of congestion as it makes lower highs since the 1.3170 high, and higher lows since the 1.2804 low," says Fan Yang, analyst at FXTimes. "A break above 1.30 is not enough for the bullish outlook, a break above the congestion resistance near 1.3025-1.3030 would be the first sign. Then ability to hold above 1.30 focuses the market on the resistance pivots at 1.3070 and 1.3170."

Meanwhile the UBS analyst team maintains its bullish perspective on EUR/USD, suggesting that "A break above 1.2992 would trigger scope for more upside opening the doors to 1.3072 and then 1.3172." Following this idea, currency strategist Jane Foley at Rabobank, says that sudden bouts of risk aversion would benefit the greenback although they would be short lived, pointing to pullbacks towards the 1.2600 region in the very near term, while 1.3500 arises in a 12-month view.

In Commerzbank team's view, "In the absence of further news there is unlikely to be any further movement. The squaring of EUR shorts is likely to be over now as the CFTC data on the positioning of speculative IMM traders suggests. That means that the expectations are priced in and now politicians and central bank have to deliver," they say. "Even those supporting our long term pessimistic outlook might share the market's optimism short term. We fear that the potential for disappointments would be considerable if the European officials disappoint once again. As a result I see a better risk reward balance for EUR shorts - even in the short to medium run."

Source: Euro Trapped In A Range, Could Spain Unfold A Trend?