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Forex: EUR/USD bulls regain control; break of 1.35 clarifies picture

The European-shared currency, after zigzagging inside a 2-day range between 1.3430 and 1.3350, finally broke to the upside on Tuesday, posting a fresh weekly high at 1.3474 before stabilizing around 1.3440/50.

Most of the market action on Tuesday was dominated by an initially confusing G7’s statement on the yen's recent depreciation, which some international players had labeled as manipulative. The main take away, though, was that the most advanced economies in the world seem to approve Japan’s efforts to overcome its semi-chronic deflation and weaken the JPY.

Back to the Euro, the break higher was fueled by ECB President Draghi headlines, who again played down the "currency war" issue. As Kathy Lien, fundamental expert and co-founder at BKAM notes, "Draghi criticized people whose mandate is not immediately related to monetary policy (think E.U. politicians) for engaging in inappropriate or fruitless comments on the currency."

Draghi added: "They are inappropriate if they are meant to instruct the ECB." Draghi believes that "the term currency war is way way overdone, not existing declaration of currency wars from G7." As Kathy says, "it is clear that the ECB has no interest in participating in the currency war and will keep their euro comments to a minimum."

Technically, Valeria Bednarik, chief analyst at FXstreet.com, notes: "The pair consolidates its recent gains, with a shy bullish tone on the hourly chart, where indicators stand in positive territory and 20 SMA gains bullish slope below current price, offering support now around 1.3420. Still, price needs to overcome static resistance around 1.3485 to resume the upside."

Fan Yang, also contributor at FXstreet.com, has more cautious words for the EUR/USD, saying: "The pair closed the session unable to push above a fallinng channel since February seen in the intra-day charts. A push above 1.35 will probably be needed to bring about some bullish outlook toward the 1.3595-1.36 area, which was a previous pivot."

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