Euro Consolidates After Testing 1.3400

Includes: FXE, UDN, UUP
by: FXstreet

The euro advanced versus the dollar on Monday to reach its highest in 11 months during the Asian session, but lost momentum and weighed by disappointing eurozone data it pulled away from highs. However, with the downside pretty much restrained, the shared currency entered in a consolidation phase.

The pound is among the worst performers, while the yen has managed to trim part of its recent losses versus the dollar. Meanwhile, U.S. stocks dipped lower to start the week, dragged by the fall in Apple on news the tech giant cut its component orders for the iPhone 5 due to weaker-than-expected demand.

"Although today's market activity is consolidative in nature, there are no immediate events that look likely to halt last week's more favorable market sentiment and foreign currency gains, and our outlook is for some further slippage in the U.S. dollar over the near-term", said Nick Bennenbroek, Head of Currency Strategy at Wells Fargo Bank.

Euro eases from 1.3400 but holds positive bias

The EUR/USD has staged a limited correction on Monday as risk appetite started to fade and technical indicators reach overbought levels in bigger time frames, after the cross rallied to a high of 1.3402. However, the outlook remains bullish with immediate support at the 1.3300 level. A decisive break above 1.3400 would open the doors for a retest of 1.3485 (2012 high).

"The EUR is a middle performer among the majors, despite a generally sideways price action overnight. But the single currency has made a marginal new high against the USD (1.3402, the highest level since February 2012), which has only added to the very constructive push above 1.33 at the end of last week", says the TD Securities team. "1.33 should now be a key pivot point, and we expect dips should be rather shallow now on the trek toward 1.35/36 in the coming weeks".

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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