Forex: EUR/USD consolidates above 1.3300; is the 1.35 the next frontier?
FXstreet.com (San Francisco) - After reaching its 11-month highs at 1.3403, the EURUSD traded slightly down to 1.3340 reached in the American morning to recover and close Monday at 1.3380. The Euro is 0.12% higher on the day.
Following the 1.3400 test, the EURUSD 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.
In the short term, next resistance at 1.3487 (2012 high Feb.24) ahead of 1.3491 (50% of 2011-2012 decline) en route to 1.3550 (high Dec.2 2011). On the opposite side, a drop beyond 1.3336 (low Jan.14) would target 1.3249 (low Jan.11) and then 1.3192 (MA21d).
What's next?
According to FXstreet.com analyst Richard Lee, there are three things bolstering the EURUSD higher: The ECB's rate cut no longer an option, the EURCHF pullback and the 1.3300 technical violation. "Now, with pivotal resistance at 1.3300 broken to the upside, the next resistance test for EURUSD will be the 1.3511 50% fib resistance barrier," affirms Lee.
TD Securities' analysts Shaun Osborne Greg Moore agree with Lee. The "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." They wrote added that the EURCHF should benefit from this upside, already reaching a new high since December 2011.
"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.
In the same line, UBS analyst team considers that the EURUSD may overshoot long-term targets in the near term. EURUSD at 1.3350/70 is close to the UBS year-end forecast of 1.34 while EURCHF and EURJPY are also close to the 12 month forecasts (1.23 and 121). "Nevertheless, the exchange rates may well overshoot our long-term targets in the near term, as the need to cover short EUR positions is high", says the UBS team.
The day ahead
Tuesday's docket in the euro area will kick in with the German inflation figures, followed by an annualized measure of the GDP in the first economy. Italian CPI will follow, ahead of a key 12m and 18m auction of Spanish Letras. EMU trade balance figures will close the data front.
Investors must pay attention to UK's CPI, PPI and retail price index with its BoE inflation report. In the US, the Retail Sales will be the event of the day with the NY Empire State Manufacturing Index, the business inventories and the PPI catching attention.
However, from now onward, the debt ceiling debate will focus the market attention as the fiscal cliff did in the past. Specially since Ben Bernanke and President Obama speeches and the Geithner's letter to Congress saying that even brief default would be damaging, he expects to hit debt ceiling between February and March.
Following the 1.3400 test, the EURUSD 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.
In the short term, next resistance at 1.3487 (2012 high Feb.24) ahead of 1.3491 (50% of 2011-2012 decline) en route to 1.3550 (high Dec.2 2011). On the opposite side, a drop beyond 1.3336 (low Jan.14) would target 1.3249 (low Jan.11) and then 1.3192 (MA21d).
What's next?
According to FXstreet.com analyst Richard Lee, there are three things bolstering the EURUSD higher: The ECB's rate cut no longer an option, the EURCHF pullback and the 1.3300 technical violation. "Now, with pivotal resistance at 1.3300 broken to the upside, the next resistance test for EURUSD will be the 1.3511 50% fib resistance barrier," affirms Lee.
TD Securities' analysts Shaun Osborne Greg Moore agree with Lee. The "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." They wrote added that the EURCHF should benefit from this upside, already reaching a new high since December 2011.
"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.
In the same line, UBS analyst team considers that the EURUSD may overshoot long-term targets in the near term. EURUSD at 1.3350/70 is close to the UBS year-end forecast of 1.34 while EURCHF and EURJPY are also close to the 12 month forecasts (1.23 and 121). "Nevertheless, the exchange rates may well overshoot our long-term targets in the near term, as the need to cover short EUR positions is high", says the UBS team.
The day ahead
Tuesday's docket in the euro area will kick in with the German inflation figures, followed by an annualized measure of the GDP in the first economy. Italian CPI will follow, ahead of a key 12m and 18m auction of Spanish Letras. EMU trade balance figures will close the data front.
Investors must pay attention to UK's CPI, PPI and retail price index with its BoE inflation report. In the US, the Retail Sales will be the event of the day with the NY Empire State Manufacturing Index, the business inventories and the PPI catching attention.
However, from now onward, the debt ceiling debate will focus the market attention as the fiscal cliff did in the past. Specially since Ben Bernanke and President Obama speeches and the Geithner's letter to Congress saying that even brief default would be damaging, he expects to hit debt ceiling between February and March.
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