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Forex pairs in this Article » EUR/USD
FXstreet.com (Barcelona) - The euro is testing daily lows ain the area around 1.3520/30, retracing ground after yesterday's failed attempt to follow through the key resistance at 1.3600, as a non-existent calendar in the euro area is leaving the EURUSD to the mercy of the risk trends.

& Politics is back

Although we're at the doorsteps of the ECB monetary policy meeting, the euro seems to ignore the fact, as shown by the congestion pattern of the last sessions, all hinting at a bearish scenario. Market consensus is strongly pointing to unmodified interest rates, however, this time the fireworks might come from President Draghi's speech, as an increasing number of voices are forecasting a more dovish tone that would add to the selling interest. Therefore, and if that case materializes, then the 2012 highs around 1.3480/85 would be the initial relevant target, en route to the 21-day moving average at 1.3377 ahead of the 55-day moving average at 1.3211 and then the major support around 1.3120/25, where sits the 6-month uptrend line.

The recent climb of the single currency to levels above 1.3700 has started to prompt investors and government officials to think about the problems surrounding such a high exchange rate - relatively speaking - and the direction of the ECB's monetary measures, clearly in the opposite direction to the Fed, BoE and BoJ. However, a hermetic situation surrounds the central bank and its officials, as demonstrated by the radio silence after President F.Hollande's plea about the mounting dangers of the late euro strength.

Adding potential political risks in the near and short term in the euro zone, the Italian elections contributes to the unclear panorama in the peninsula, where all points out to a coalition between the centre-left party and the current PM Mario Monti to be the next ruler in Italy. However, of course all of this sits against the backdrop of never ending rhetoric from former PM S.Berlusconi, far away to give up the fight.

In addition, Spanish President M.Rajoy is currently facing a potential scandal regarding corruption allegations within his Popular Party, which are still far from resolution. Both cases triggered the last spike in both Italian and Spanish benchmark bond yields.

All in all, hours are counting to see another test of the late euro ascent, but above all, its true solidity.

After the last bounce off lows in the proximity of 1.3460, expert Karen Jones at Commerzbank commented, "We suspect that this was a false break above 1.3485/1.3564. We have a 3 month support line at 1.3202 BUT key support is the 1.3125 6 month uptrend".

The late weak momentum in the cross is reflected in the in-house Bullish Percentage Index, where the index continues to navigate below the key 50% threshold, at the moment showing that 47.37% of euro-based pairs are still in bullish mode.
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