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Forex: EUR/USD, the 1.30 flirt goes on ...

Following what could be described as a 'remarkable' jobs number in the United States last Friday, with the jobless rate down to 7.7% and the economy creating 236K new jobs, highest since early 2012, the US Dollar continues to be one of the big winners in the currency market. Are the stars aligning for further Greenback strength?

Before touching on the prospects for further USD appreciation, especially against the Euro, an interesting phenomenon not to ignore last Friday is the positive correlation between the US Dollar and the equity market, an occurrence which has seen commentators of the market busy speculating such behaviour as an early sign of improvement in market confidence.

In a recent article FXstreet.com notes how this correlation may sound a bit odd for those trading the market post the financial crisis, as the pattern has been one of "selling the greenback as stocks rise signaling increasing confidence in the economic developments all around the world, and buying the safe haven on indexes slide and increasing distrust..." the article notes.

On this developing pattern, Greg McKenna, CEO at GlobalFX, said: "Of course that makes sense if you hold the view, like I do, that FX markets are usually a beauty contest and at present are a least ugly contest. On that basis the US dollar is the least ugly of the big 4 currencies of the Euro, Yen and Pound all of which have been under pressure lately..."

Other sectors of the market have attributed the recent USD strength to the growing belief that the Fed might bring forward a QE exit strategy should market data continue to give further evidence of 'significant improvements' in the jobs sector.

According to Jon Hilsenrath, Fed observer working for the Washington Journal, "when Federal Reserve officials next meet later this month, they no doubt will welcome recent job-market improvements, but they also will want to see more." The central bank analyst adds that "the Fed has said it wants to see "substantial progress" in the job market before pulling back, which likely would require several more encouraging employment reports like Friday's."

Amid this firmer conviction on holding the US Dollar, a trend present since early February, Euro buyers are nevertheless holding their ground, defending the critical psychological level of 1.30 tooth and nail.

By looking at Friday's upbeat NFP, technical reports obtained from FXstreet.com contributors seem to have certain consensus on the path of least resistance being the downside, however, as mentioned, participants camped just below the round number continue to show resilience to give up the buying strategies either, as proven by the multiple bounces since Feb 28.

According to Valeria Bednarik, chief analyst at FXstreet.com: "Renewed selling pressure that drives price below 1.2960 support, should anticipate another leg lower, with 1.2880 then at sight."

A second opinion is shared byFan Yang, co-founder at FXTimes and independent contributor at FXstreet.com: "This past week of risk events has put the pair into a consolidation mode, but the EUR/USD remains bearish. A break above 1.3160 will be needed to establish a bottom. Otherwise, there is room to the 50% retracement and a previous support pivot at 1.2875."

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