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The euro advanced on Monday despite the fact the EU summit failed to offer answers to the lingering concerns about the eurozone and after regional elections in Spain passed off okay, removing an obstacle to the central government to request a bailout. However, uncertainty over when Spain will request aid kept investors cautious and limited euro gains.

European stocks rose while US futures point for a positive opening following sharp losses at the end of last week amid a more risk-positive environment. Elsewhere, it has been quiet Monday trading with little ahead for the rest of the day outside of further US earnings.

Euro still rangebound, 1.3000 key on the downside

The euro regained ground on Monday despite little developments made at the EU summit as focus has been on the positive outcome of the Spanish regional elections. EUR/USD rose to retest the 1.3070 resistance area, where the 100-hour SMA is reinforcing the hurdle and it was last up 0.2% at the 1.3050 zone, but held within the 1.2800 to 1.3170 range it has traded in since mid-September.

Even though EUR/USD has scope to climb further in the very near-term, as Spain seems to remain as the main market driver, a break above 1.3170 could be unlikely in the absence of a bailout request by the time being. Meanwhile on the downside, the 1.3000 support level should contain dips in order to maintain the bullish bias alive.

In this regard, the TD Securities team argues that "without much on the European calendar this week (other than PMIs and German IFO), the focus is likely to lie outside of the region in the near term. Technically speaking, the EUR holding up above 1.3000 continues to add to its more constructive outlook".

Meanwhile, Marc Chandler, Global Head of Currency Strategy at BBH, notes that speculative positioning at the IMM still shows a large number of short euro positions remain, and whose short-covering could fuel another leg up in the euro. "However, we think the euro has yet to prove itself", BBH comments. "After the initial adjustment to reduced tail risk in Europe, the euro has traded in a $1.2800-$1.3200 range. Since the euro most recently tested the upper end of the range, the rule of alternation suggests some operators will anticipate a move toward the lower end of the range".

Source: Euro Holds Upside Potential, 1.3000 Key On The Downside