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There are two readings in the EUR/USD story following today's session. Firstly, the euro has returned back to its 1.2830/1.3060 one-month range against the U.S. dollar after a brief adventure close to 1.3135 highs. Interpreting this movement, it means that the pair could go down to seek their previous range bottom at 1.2830. Secondly, the pair has just closed above the 1.3000 key level, and it could mean that risk upside is still alive. So what can we expect for the next week?

The EUR/USD closed the day at 1.3020, 0.37% below Friday's opening price, and 0.55% negative on the week after its second day of heavy losses, as investors were unimpressed by the EU Summit outcomes. A perceived lack of progress on a Spanish bailout request, and Merkel assuring that Spain won't get retroactive direct bank recapitalization curbed demand for the single currency into the end of the week.

Risk aversion took the market in Forex and equities, with Wall Street falling more than 1%, with the overall tone in the financial market is beginning to shift. Stocks have recorded their worst single-day decline in nearly four months. The Dow Jones Industrial Average dropped 205.43 points on Friday, or 1.5%, to close at 13,343.51. The Dow advanced 0.1% for the week. The S&P 500 index lost 24.15 points, or 1.7% to end the day at 1,433.19, gaining 0.3% for the week. The Nasdaq Composite shed 67.25 points, or 2.2%, to 3,005.62, ending down 1.3% from the close a week ago.

But movements between FX and stocks weren't correlated as usual, Forexlive.com analyst Jamie Coleman pointed out about the stabilization in the EUR/USD, but the collapse in equities. "Not sure why Forex has decoupled from the slide in U.S. equities, but EUR/USD seems pretty comfortable on the 1.3025 area." Coleman pointed that mall bids were "seen in the 1.3000 area, with more stops set below that level," at the same moment "stocks traded at their lows, with the S&P down almost 1.6%."

In this line, Antje Praefcke, analyst at Commerzbank, thinks that the EUR/USD is likely to be relatively unspectacular over the coming days:

So far, the euro has stood up well against the dollar, thanks to the recent unofficial news on the subject -- the troika seems to be treating the Greek efforts sympathetically and Moody's decided against a rating downgrade of Spain...

As the EU summit has not provided any new information on the issues important to the market, the euro is likely to be able to defend its position over the coming days... So there is no reason (yet) to sell the dollar on a grand scale, but doubts about a yes or no regarding QE3 will continue to put pressure on the dollar.

TD Securities explains in a weekly technical research note: "We think EUR/USD is a buy on modest dips from here." TD spots "a broad band of support between 1.2800/70 where the recent lows converge with the trend and moving average support," and says that only on a break back below 1.2800 will its outlook turn bearish again. EUR/USD finished the week at 1.3020.

Next Week, New Challenges

As for the next week, the market should pay attention to interest rate decisions, not only in the U.S., but also in other countries such as Canada and New Zealand. ECB's president Draghi visits Germany on Wednesday, and a battery of PMI data from the eurozone will be released as well.

This weekend, Spain will hold regional elections, which could provide more concerns about Europe, as the outcome of the election will affect the government's decision on a bailout. Spanish Prime Minister Mariano Rajoy has been delaying the bailout request on the back of the upcoming elections, and the Government party's fears of losing its majority in Galicia.

The most important events next week are:

1. Fed Interest Rate Decision (Oct 24)
2. Q3 Gross Domestic Product Annualized (Oct 26)
3. ECB President Mario Draghi Visits Germany (Oct 24)
4. BoC Interest Rate Decision (Oct 23)
5. RBNZ Interest Rate Decision (Oct 25)

And check out the U.S. Presidential Debate on October 23.

Finally, the FXstreet.com's currencies forecast poll has just been released, with its Experts, Banks & Brokers' targets. The forecast sees a bit more confidence in the EUR/USD for the next week. Experts and banks agree the EUR/USD may rise in the short term. Year-end however, will see the EUR fall, according to the results.

Source: 2 Stories In The EUR/USD's Close At 1.3020: To Risk Or Not To Risk