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Euro takes a breather but pressure persists

The US dollar trades firmer overall, although major crosses remain confined to recent ranges as markets begin the week with a cautious tone ahead of key events this week, including monetary policy announcements from eurozone and UK and the US employment report.

The euro remains virtually unchanged, stuck around 1.3000, taking a breather despite Italy's political uncertainty persists. Stocks are broadly lower around the world as Italy's political situation and soft Chinese confidence survey are also contributing to the subdued global mood.

"Foreign currencies could remain under pressure early this week, while policy announcements and the U.S. jobs report could be important for the direction of FX markets over the coming weeks", says Nick Bennenbroek, Head of Currency Strategy at Wells Fargo Bank.

Euro consolidates around 1.3000 ahead of key events

The euro trades slightly lower versus the greenback on Monday as consolidation is the main theme in the FX market. While eurozone finance ministers meet today to discuss Cyprus bailout and maturity extensions for Portugal and Ireland, in the absence of news, the EUR/USD could extend its sideways period ahead of the ECB meeting and the US NFP report.

However, technically speaking, the EUR/USD holds a neutral to slightly bearish tone in short-term charts, while broad outlook favors a downside continuation. A break below the 1.2965 zone (Friday's low) would expose the 1.2900 level, ahead of 1.288/60. On the upside, the cross needs to regain the 1.3060 to ease the pressure.

In this regard, the TD Securities team notes that the broader trend remains bearish still though for the weeks ahead, and 1.2880/2900 looks to be the next important support below spot. "That said, it may be prudent to remain more neutral since the ECB on Thursday is the EUR event risk of the week, and our call is that they will remain on hold (while there is a decent risk that they will cut the refi-rate)", TD says.

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