EUR/USD continues to trade below the 38.2% Fibonacci retracement of the decline from 1.4940 to 1.2040 at 1.3150, having been unable to rally above the level after two failed attempts in recent weeks. Spanish PM Mariano Rajoy's regional elections win in Galicia has been perceived as EUR-positive, and is seen as a boost in the country's austerity crusade.
The week ahead brings the US GDP, FOMC...
For the week ahead, the EUR/USD's direction will likely hinge on the dollar's fundamentals, with the first estimate of 3Q U.S. GDP (Friday) the primary indicator of interest, along with the outcome of a Federal Reserve meeting (Wednesday).
The latest U.S. GDP data is expected to show that the economy expanded 1.8% on-quarter and, if realized, would be a slight improvement from the 1.3% expansion seen in the second quarter. However, in the grand scheme of things, the U.S. economy's rate of expansion continues to disappoint.
Another event that could potentially affect EUR/USD this week is ECB President Mario Draghi's trip to Germany on Wednesday. Draghi will hold a news conference after talking monetary policy with German lawmakers.
Regarding the political situation in the U.S., the presidential election appears to have tightened, and today (Monday) will be the final debate between President Barack Obama and the Republican nominee, Gov. Mitt Romney. Yet, as Marc Chandler, Global Head of Currency Strategy at Brown Brothers Harriman explains of the market's potential reaction to U.S. elections,
even if one has a high confidence of a particular electoral outcome, the market response is more difficult to anticipate.
EUR/USD - Price action still inconclusive
EUR/USD is getting some buying interest ahead of the European open, last at 1.3050 with support noted at 1.2970 (October 2 high), while, above the mentioned 38.2% Fibonacci resistance area, the 100-week EMA offers resistance at 1.3210. According to Valeria Bednarik, Chief Analyst at FXstreet.com, there is risk that may jeopardize latest euro strength.
According to John Noonan, Head of IFR Markets,
the EUR/USD has attained a bid tone after Spanish elections as Rajoy party win in Galicia is a boost in austerity drive. Option maturities at 1.3050 are also giving EUR/USD some buying support, with buyers camped ahead of 1.3000 with stops eyed below that level.
On the way up, FXWW Founder Sean Lee notes:
Interbank dealers report decent-sized offers starting at 1.3065 through 1.3080.
The analyst adds that EUR/USD is currently in a slow up-trend and it could easily fall to 1.2900 or rise to 1.3170 without altering this picture appreciably.