The euro advanced against the dollar on Tuesday after data showed the Spanish economy contracted slightly less than expected in the third quarter and a successful Italy's bond auction.
European stocks also rose underpinned by the positive data, while U.S. markets remain closed for a second day. With the attention turned to the Hurricane Sandy, sentiment improved maybe on relief that the worst phase of the storm has passed. Meanwhile, in the macroeconomic domain, a better-than-expected reading of housing prices supported the mood.
"Without anything on the calendar, established trends and the flow of headlines are all that is left to drive price action", says the TD Securities team.
Euro nears 1.3000 resistance, still rangebound
The euro rallied over 80 pips from the 1.2880 support area toward a high of 1.2974, supported by broad-based U.S. dollar weakness. However, today's price action should be taken with cautious as it will take a little time before markets are fully back online and signals are more reliable.
On a longer term view, the EUR/USD remains on a rangebound pattern between 1.2800/1.3170 still in the search of a catalyst strong enough to determine a directional bias. In the short-term however, the outlook has turned slightly positive as the pair has found strong technical support at 1.2880 during the last days. A recovery above 1.3000 would improve the outlook, while further and key support is seen at the 1.2835 area, where the 200-day SMA should contain dips and protect the 1.2800 barrier.
While the Wells Fargo and the UBS teams are broadly neutral on the U.S. dollar's prospects against other currencies in the coming days, analyst at UBS Gareth Berry notes that "important support lies at 1.2802, a break below would be bearish in the short-term triggering deeper sell-off to 1.2741".
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
