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EUR/USD knocks the 1.3100 door; what's next?

FXstreet.com (San Francisco) - The Greenback's weakness was the biggest story on Monday as the USD fell furiously following a weaker than expected US data. In words of the BK Asset Management's analyst Kathy Lien, the US Dollar succumbed in "another case of deleveraging." In this way, The Euro joining the environment and it rose to the highest level since May 9th at 1.3110.

After climbing to highs, the EUR/USD traded in consolidation mode in the area just below the key 1.3100 handle. With 0.70% daily gains, the short term perspective remains as slightly bullish according to the FXstreet.com trend index in the 15-minute chart. Indicators such as MACD, CCI and Momentum are pointing to the north while the Stochastic is bearish.

"The EUR/USD managed to reach 1.3107 regardless a Cyprus downgrade by Flitch, correcting now the overbought readings reached in the hourly chart, although maintaining the positive bias," comments FXstreet.com analyst Valeria Bendarik. "in the 4 hours chart price managed to recover from a bullish 20 SMA, while indicators stand in positive territory, losing upward momentum after recent correction but far from signaling a retracement. Buyers are now expected to surge on dips towards 1.3000/40 area, while sellers align at the 1.3200 area."

Market players reacted to the weaker than expected ISM manufacturing index as the first hint for a Fed keeping the current pace of bond buying. Following that data, the USD was sold hard. Back to analysis, Kathy Lien expects a consolidation period in the short term as the "EUR/USD could take a break before extending their latest moves as we have seen today it didn't take much to trigger additional deleveraging in the markets so traders need to an eye on key levels."

"As long as U.S. stocks don't crash, any decline in the dollar will be slow but if stocks see another day like Friday, then USD/JPY could find itself at 98 and the EUR/USD at 1.32."

In the recent launched 'Live Analysis Room', Analyst Dale Pinkert pointed a 1.3300 as next EUR/USD target in the middle term, however, in Monday's interview, Independent technical analyst Guiseppe Basile pointed that even 1.4000 area is now on the table.

As for the long term, UBS analyst team continues "to see the USD stronger in coming months and keep a short EURUSD recommendation" despite recent data has dampened a bit the recent expectations about the Fed likelihood to start tapering the current QE in the near future." UBS 3-month target is 1.2800.

Among these lines, the Rabobank's analyst Christian Lawrence commented, “EUR net shorts continued to increase albeit at a much slower pace than seen in the past two weeks. EUR shorts still remain well off the levels seen before Draghi’s 'whatever it takes' speech”. Lawrence adds that "the jump in USD longs was mirrored by an increase in EUR shorts as EUR/USD continues to trade the 1.30 handle”, he concluded. Rabobank 1-month target is 1.2900 while 3-month forecast is 1.2800.

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