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Forex: Draghi rescues Euro from its $1.30 agony, can it last?

The Euro was catapulted to its highest level of the week at 1.3112 against the US Dollar last Thursday, after making more than 1% gains for the day, an occurrence only seen once before this year.

The change of perception towards holding Euros came as a reaction of a less-dovish-than-expected ECB's President Mario Draghi on his post monetary policy meeting speech, which had been preceded by an unchanged rate decision at 0.75%.

While a reduction was considered by some members in March, the market had its focus in different fronts. Firstly, a downgrade in the projections for economic growth within the Euro area coupled with contained inflation expectations did not sit well for the Euro, which had an initial decline, however, an optimistic outlook for the 2nd half of the year started to set the Euro in upward motion.

The big kicker prompting large inflows into the Euro came, as Ashraf Laidi, founder at AshrafLaidi.com, explains, "when Draghi did not mention 'appreciation of the euro' as a factor in downside risks to price developments as they did in February."

"Mentioning fewer factors to the downside price risks is naturally more positive for the currency, especially when currency appreciation itself is singled out as the distinctive factor between today and February" the analyst said. Ashraf tipped 1.2900-1.3200 as the new range in the EUR/USD until further clarity is obtained on Italian elections round 2, another focal point.

As more calls seem to emerge over a possible short-term recovery in the Euro, Nomura strategists, still think their current forecasts of 1.28 for Q2 and 1.25 for Q3 "look reasonable", adding that "we would continue to seek opportunities to sell EUR on rallies." The bank sees "EUR in a new regime of growth under-performance as key driver."

Whether or not the Euro can recover further or instead the US Dollar is the most supported currency, the last say on setting the end of week sentiment on the pair is down to the US non-farm payroll number for February, with expectations a bit higher in recent days, especially after a solid ADP private payrolls report. Median forecast on Bloomberg is +165K after 157K in Jan.

FXstreet.com has interviewed varies analysts, one of them being Mr. Talal Abdullah, Financial Analyst at ICN.com, who said that if the data prove better than expected "it could cause short-term positive reaction in the stocks market," suggests and adds that "the uptick in NFP should increase the appeal for the U.S. dollar, as it raises the outlook for growth."

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