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Forex pairs in this Article » EUR/JPY, EUR/USD (San Francisco) - Following a brief rejection at 1.3375 to find support at 1.3335, the EURUSD resumed its uptrend toward intra-day highs at 1.3585, just ahead the 1.3400 key level. Currently the EURUSD is trading quiet around 1.3375, closing the day 0.65% above opening price.

There are 3 reasons why the EURUSD is rebounding above 1.3300 according the analyst Richard Lee: Spanish successful debt auction, European Central Bank reinforcing growth in 2013 and the German Economy Minister Philipp Rosler remaining bullish.

"Rising off of 1.3265 support, the EURUSD has moved higher on the session and is set for another test of 1.3400 in the near term," comments Lee. "Behind the move are three key themes that are bullish for the single currency and may make the difference on whether the pair successfully breaks through the formidable barrier."

As for the short term, 1.3400 comes again as immediate bullish target for the cross ahead of its 2012 high of 1.3485. Next resistance levels lie at 1.3487 (2012 high Feb.24) and then 1.3491 (50% of 2011-2012 decline). On the flip side, support levels are located at 1.3249 (low Jan.11) ahead of 1.3300 while only below the 1.3250/45 area the short-term pressure would increase, targeting the 1.3200 mark. The longer-term view, however, remains positive, even though daily indicators begin to lose momentum.

Are the euro bulls ready to rock?

Bank of Tokyo Mitsubishi UFJ analysts are bullish on EURUSD's prospects ahead and can see spot moving between 1.3200-1.3500. With the Fed currently easing monetary policy through USD85.0 billion of asset purchases per month, the ECB's contrasting on hold stance is gradually pushing EURUSD higher.

The bank noted in a recent report that the ECB's commitment to purchase unlimited Eurozone government bonds is also proving a sufficient backstop for now to restore investor confidence leading to an ongoing narrowing of the Eurozone sovereign credit risk premium supporting the Euro.

In this line, the attempt to talk down the Euro by Euro-group Chair Juncker will likely only help to dampen upside in the near-term without support from further ECB policy easing.

"The EUR is still on a bullish path from a technical standpoint on the daily and weekly charts, leaving us favouring higher levels regardless", says the TD Securities team. "The spike higher has put the EUR at the top of the FX performance rankings overnight, lifting both EURUSD and EURJPY toward the highs set earlier this week. For EURUSD, breaking decisively into the 1.34 handle is the next major challenge, while for EURJPY 120.00/10 is the level to watch".

On the other hand, Scotiabank sees the EURUSD closing the year at 1.27. "As EUR approaches 1.35 we would expect resistance to intensify and continue to hold a year-end target of 1.27, expecting uncertainty and significant hurdles to weigh on EUR trading later in the year", affirmed Chief Currency Strategist Camilla Sutton at Scotiabank.

The day ahead

Markets in the US inched higher on Thursday, buoyed by the better-than-expected results in Housing Starts and the Initial Jobless Claims, falling to a 5-year low. The US Dollar Index traded in the negative ground, as risk appetite gained ground again, and the S&P 500 and the Dow Jones closed at 5-year highs.

Moving forward to Friday, risk trends will be put to the test, as China will release its GDP figures for the fourth quarter as well as retail sales and industrial production.

The UK will release its December Retail sales while the euro zone docket would be almost non-existent, as only Italian industrial orders/sales are due. Across the pond, the preliminary print of the Reuters/Michigan index will be the most important event.
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