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Forex: EUR/USD escapes bear calls; next target at 1.35

A jubilant Euro left behind negative headlines by displaying a great performance following Germany’s ZEW report, which came in much better than expected, making up ground after the top Eurozone economy was questioned last week following poor GDP figures. Fears have now dissipated about a possible German Q1 2013 recession, so have Euro sellers.

It was one of those days (Tuesday), when the rally in the Euro was well deserved, with speculators short the currency running to the exits in surrender of its short term dominance as the pair roared ahead through 1.3400 round number - also bursting through a key descending trendline coming from yearly highs - , now strengthening the prospects of further gains.

As Fan Yang, chief analyst at FXTimes, and also contributor at FXstreet.com, notes: "The break above 1.34 opens up the 1.35 handle, which is near a previous resistance pivot as well as a range breakout projection."

Valeria Bednarik, chief analyst at FXstreet.com, shares Fan's view, saying that "the steady gains above 1.3415 will deny the possibility of a bearish continuation and saw the pair approaching the 1.3500 area today."

However, if EUR/USD is to reach 1.35, especially levels beyond, it will face a bumpy road ahead, one filled with one of the most dreaded obstacles by any speculator, that is, 'uncertainty'. The unknown is a word that in the world of finances results in excitements as much as in reservations, thus the unclear polls about the Italian elections over the weekend will certainly be an element to factor in, and that may pose some obstruction to see sizeable Euro gains, unless the picture clears up.

As Reuters reports: "The last opinion polls published before a pre-election blackout suggest the centre-left is still leading Berlusconi's centre-right bloc. But as many as 30% of voters are still undecided ahead of the election on February 24-25."

NAB adds: "Looking ahead, of increasing influence on the EUR over the balance of the week is likely to be growing concern about the weekend/Monday Italian elections which carry some significant downside risk for the EUR."

Another imminent event with the potential to shake the pair's value is the minutes of the Fed's January 29-30 Federal Open Markets Committee (FOMC) meeting, to be released later today, at 19GMT, just before the NY close.

The market will be alerted looking for some signs to help price in the possibilities of an early end of the Fed's bond buying program. However, it is unlikely that the Fed may have changed much its rhetoric at the January meeting.

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