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Euro remains sedated at 1.3000

The European currency is treading water around the psychological mark of 1.3000 on Tuesday, extending boredom amongst traders, as the dockets in both the euro zone and the US have proven insufficient to ignite the least of the movement in EUR/USD so far.

… Catalyst needed

In the meantime, the ‘Italian factor’ effects after the inconclusive results of the parliamentary election at the end of February continue to fade away in search of news that can leave behind this grey area and accelerate the transition towards a more solid form of government. However, it should be noted that this scenario seems farther every day, adding uncertainty and capping whatever intention the single currency has to climb higher.

In the same queue, the US recovery seems to gain preponderance every day, boosting investors’ confidence in the domestic economy and of course, the greenback. As recently demonstrated by record highs in the DowJones, and the S&P500 potentially on the same track, an extension of the USD rally, bordering the key limestone of 83.00 looks in place. Nobody even talks about the so called US ‘sequester’ anymore!

Furthermore, with the euro zone fundamentals left aside at the moment, bouts of volatility could come from the political noise of EU officials, at least until the last part of the trading week, where the unemployment rate and inflation figures in the euro bloc would be in the limelight.

When come to technical perspectives, a longer-term horizon from weekly charts shows that the cross is still trading below the up-trend set from July 2012 lows which penetrated in late February. In addition, the RSI is navigating just below the 50 threshold, indicative that some sort of consolidation would still be in the pipeline.
Further downside should find interim support at 1.2950, where sits the 55-week moving average ahead of the area around 1.2660/1.2740, where converge the November lows and the 23.6% Fibonacci retracement of the 2011 – 2012 decline.
On the upside, there is a strong barrier around 1.3120/65 – March 8th high, 38.2% retracement and the accelerated downtrend set from February highs above 1.3700

Moving forward to Wednesday’s calendar, France would release its Nonfarm Payrolls and inflation figures, ahead of Spanish CPI and EMU’s Industrial Production. Across the pond, US Retail Sales would be the most relevant release.

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