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Buoyed by spiraling rumors about the imminence of a Spanish call for financial aid, the single currency has finally hit the key and psychological resistance of 1.3000 against the greenback during the early hours of the European session. It couldn't have been otherwise, as euro docket, late results, and the economic outlook for the 17-nation-bloc lack the vigor to propel anything.

So, basically, and going back not so long ago: first it was Chief Bernanke when he announced another round of quantitative easing in the FOMC meeting last month. That supported the later upside of the EUR via a weaker U.S. dollar. Recent strong U.S. data have also bolstered bouts of risk appetite, another source where the euro-bulls have been sucking from. And now, rumors have taken over and acted as the main triggers of this last upside. But the euro, per se, has done nothing to merit being this high.

… What's the prospect now?

Now that we reach 1.3000, the question floating in the air remains the same: will this last? Will the euro-bulls materialize their hopes of seeing the cross fly to levels beyond 1.3100? Karen Jones, currency strategist at the German lender Commerzbank, suggests "the rebound has managed to neutralize the technical indicators, and the market remains sidelined. We continue to suspect that the market will struggle to regain 1.3072 … However, while underpinned by the 1.2801 3-month uptrend, further upside probes remain plausible." The expert also adds that a breach of 1.2801 would accelerate the downside to the area around 1.2600 en route to 1.2472.

Jane Foley, analyst at Rabobank, acknowledges that Spain remains in centre stage and argues "that an increase in tension in Spain could force pullbacks in EUR/USD, we now expect these to be limited to the EUR/USD1.2800 area on a 1 mth view, with EUR/USD potentially remaining essentially range driven into year-end."

All in all, economic fundamentals have given way to politicos. Apparently, the near future of the shared currency would be determined by the next political measures in the bloc, as shown by the impacts on EUR/USD by endless back-and-forth circling the Spanish front, with comments and rumors from officials, passing the ball one to another. Waiting its turn to jump into scene remains Greece, with its policymakers sitting on their hands, fingers crossed, while the "troika" assesses the Hellenic finances. And one should not forget the upcoming EU Summit at the end of this week, nor the statistics associated with it: over the last quarters, every euro-gathering has been a non-event, a fiasco.

… Wednesday is on the cards

Markets will surely follow the U.S. presidential debate and its media consequences along the trading day. The docket will kick in with Japan's Machine Tool Orders, ahead of the BoE minutes and the jobless rate in the U.K. The only release in the eurozone will be the Construction Output, followed by the Swiss ZEW Survey, while in the U.S. Housing Starts and Building Permits will be the most relevant data.

Source: How Real Is The Euro At 1.3000?