The Dollar is trading in the middle of its 1-month range against the Euro with the pair closing Monday around 1.2950 after reaching lows as 1.2890 and highs at 1.2980. The first weekday session was quiet in currencies but choppy in stocks as Wall Street bounced from last week declines.
Wall Street moved higher Monday and closed near session highs as investors were encouraged by a positive retail sales report and strong Q3 earnings season from Citigroup (NYSE:C). U.S. retail sales came in at 1.1% in September, beating analysts' expectations of only a 0.7% rise, according to the Census Bureau.
The Dow Jones Industrial Average added 95.38 points, or 0.7% to close at 13,424.23. The Nasdaq Composite climbed 20.07 points, or 0.7%, to finish at 3,064.18. The S&P 500 Index gained 11.54 points, or 0.8%, to 1,440.13.
On the currencies field, the euro surrendered gains to trade little changed against the dollar amid uncertainty over when Spain will ask for financial aid, and over whether Greece can agree on new bailout terms. EUR/USD was last at the 1.2945 zone after failing to overcome the 1.2980 resistance level.
The EUR/USD hourly chart shows price above 20 SMA and indicators barely positive, although with not enough momentum to extend the advance at the time being. "In the 4 hours chart technical readings are positive," comments Valeria Bednarik from FXstreet.com. "Yet the fact that price is retracing from a lower high weights: unless above 1.2990, past Friday high, there's not much ground for a continuation, and even then 1.3020/30 area, will need to be cleared to confirm bulls are now in control."
According to the Wells Fargo analyst team the EUR/USD technicals are mildly positive. The Euro might go up in the near term on the back of Greece and Spain problems resolved. "The medium-term euro outlook is less encouraging with a less helpful event calendar, a recessionary economy and an accommodative European Central Bank factors that could see the currency decline around year-end and through 2013."
Wells Fargo sees EUR/USD at 1.2700 in sixth months and 1.2300 in 12. Wells Fargo puts near-term resistances at 1.3074 (October high) and 1.3172 (September). Supports are seen at 1.2804 (October low), 1.2466 (late August low).
Nevertheless, the Commerzbank team suspects that the "market will struggle to regain 1.3072", wrote analyst Karen Jones, allowing further upside attempts while under pinned by the 3-month uptrend at 1.2788, such as re-challenging 1.3072 and possibly the 1.3173/77 band.
Below that level, "increased downside pressure would see 1.2605 and 1.2472 as targets," points Jones.
In any case, euro continues searching for a catalyst that helps it to break its range. The 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.