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Euro bears recede, for how long?

The euro hit yet a lower low versus the dollar on Thursday as the shared currency was weighed by disappointing EMU employment data. However, the pair reversed losses during the American session as lower-than-expected jobless claims boosted risk appetite among financial markets, offsetting the negative effect of the growing divergence between the US and the eurozone economies.

Meanwhile, the pound staged an impressive rally with no clear catalyst, while commodity currencies advanced on firm employment data from Australia and the US.

"We lean toward further U.S. dollar gains in the coming days, while we will also be monitoring Italian political developments and the European Leaders meeting", says Nick Bennenbroek, Head of Currency Strategy at Wells Fargo Bank.

Euro fails to break below 1.2900

The euro printed a yearly low at on Thursday suggesting a greater risk that the Feb/Mar bear trend extends, although the 1.2910 zone (Fib 76.4% of 1.2660/1.3710) proved to be strong support as the pair bounced sharply from that area helped by fundamental drivers. EUR/USD rallied over 100 pips throughout the session and regained 1.3000.

However, as long as the pair holds below 1.3080, the bearish threat would persist, and a break below 1.2900/10 would expose 1.2860 (200-day SMA) and 1.2800 (Oct 2012 low) as next targets. On the upside, regain of 1.3080 could ease the immediate pressure but only above the 1.3100/35 area, where the psychological hurdle, the 100-day SMA, 20-day SMA and last week's highs converge, would improve the technical outlook.

"We continue to see strong support just below spot though, which means it will take another strong catalyst to push lower than the 1.2880/1.2915 zone", says the TD Securities team. "A sustained move below that area would be much more damaging to the still constructive picture on the weekly chart".

Forex: GBP/USD keeps pushing higher, eyes on 1.5100

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