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Euro bears out of the caves

FXstreet.com (Barcelona) - The ephemeral joy after the better-than-expected French manufacturing PMI print served at least to lift the shared currency to session highs above 1.3080, however it later proved to be short-lived. Some sensation of transitivity was then hovering over euro bulls, warming up for a new visit of 1.3100 and beyond as German and EMU prints were on the horizon. So, what happened? Another slap of reality for euro traders and politicians who envisioned a recovery for the euro area from the second half of the present year. Another violent and unexpected wake-up call that gives recent comments by Buba’s J.Weidmann credit when he hinted that it may take a decade for the euro bloc to leave the crisis behind.

… 1.30, so close, so far away

The EUR/USD decline has accelerated and seems to have found a bottom in sub 1.2980 levels so far, although the pessimism amongst traders is poised to stay for longer now. Accordingly, the market chat regarding a rate cut by the ECB in its next monetary policy gathering has been growing in importance, weighting on sentiment and now undermining hopes of a new visit to levels beyond the key limestone at 1.3000.

In the actual context of increasing risk aversion and selling pressure in the single currency, the next significant catalysts for the single currency will be tomorrow’s German IFO series and Friday’s GDP figures in the US economy during the first quarter, the latter influencing the cross via the greenback. However, market consensus is not that optimistic, pointing to softer results in those upcoming events.

What about the technicals? The cross is now transiting the area of 1.2980/90, quickly leaving behind the psychological mark at 1.3000 and testing the area of 1.2975/95, where converge the 23.6% Fibonacci retracement of the February-April decline and January lows. Further selling interest would then target the key 200-day moving average at 1.2935/40, en route to December lows around 1.2880/85.

On the upside, the initial hurdle would be the area of 1.3090/1.3115, where sit the channel support line and the 38.2% Fibonacci retracement of the February-April slide, ahead of 1.3201/30 (last week’s highs and the 50% Fibonacci retracement).

European markets up despite PMI in Germany and China, Apple earnings on the way

The German DAX 30 (+0.58%), the French CAC 40 (+1.61%), the Italian FTSE MIB (+0.97%), the Spanish IBEX 35 (+1.45%) and the British FTSE 100 (+0.92%) are edging higher on Tuesday despite the upsetting result of German flash PMI in April. The preliminary release of April German manufacturing PMI was expected to stay unchanged at 49.0 but dropped to 47.9 and services PMI eased from 50.9 to 49.2, instead of the slight rise to 51.0 as expected. French Services PMI rose from 41.3 to 44.1, beating the 42.0 expectations, while the manufacturing figure rose from 44.0 to 44.4, above 44.3 consensus.
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