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Forex: EUR/USD trades above 1.3150 and closes May with strong gains

FXstreet.com (San Francisco) - The euro traded positive against the US dollar on Tuesday as markets are expecting that the Fed will maintain the status quo regards to its QE after the recent economic data. On the bigger chart, the EUR/USD is closing April with strong gains from the 1.2743 monthly bottom as it has recovered all the March losses. April has been the seventh month of gains of the last ten.

As FXstreet.com's analyst Valeria Bednarik wrote in a recent report, "pretty interesting Tuesday," as the EUR/USD was trading sideways between 1.3065 and 1.3075 in the European session, but suddenly the pair jumped strong to the 1.3185 in the early American session before stalling. "Month end fixing and some short covering gave the pair the first push higher, before disappointing US PMI data and headlines stating an ECB rate cut is not a done deal, fuel the rally."

At this moment, the EUR/USD is pricing quiet at 1.3165, 0.50% positive on Tuesday and trading strongly bullish according to the FXstreet.com's trend index. Indicators such as MACD, CCI and Momentum are pointing north while the Stochastic is neutral in the 1-day chart.

The situation is similar in the short term, "the EUR/USD hourly chart shows a strongly bullish 20 SMA converging with the Fibonacci retracement around 1.3115/20, offering short term support, while indicators hold in positive territory," states Bednarik. "In the 4 hours chart technical readings present a strong upward momentum, reflecting latest run higher and the fact that price stands near the daily high. New gains beyond 1.3200 is what it takes to confirm an upward continuation in the pair, with 1.3250/60 area then at sight."

Bank's First day: Fed

Following recent economic data in the US such as the weaker than expected Q1 GDP and today's Chicago PMI data showing contraction, market is assuming that the Fed could remove from its statement the language that signs the asset-purchase tapering this year and the FOMC will maintain the status quo regard to its never-ending QE.

"The idea here is that the FOMC will inevitably downshift its rhetoric into a more firmly dovish stance again," points the Saxo Capital Markets team. With the FOMC dovish members winning the battle against the bullish in the Fed concilium, "the upside scenario for EURUSD is of course driving things at the moment,"

"one can argue that we should be looking for another significant upwave, basically a C-wave in an A-B-C three-wave correction that takes the pair to perhaps as high as 1.3410 on a full 100% extension, though that lies a bit beyond the 61.8% retracement of the huge sell-off wave from 1.3700+ to 1.2750, which comes in at 1.3340," comments the Saxo team. "That assumes, of course, that we take out the 1.3200 overhead flat-line resistance."

Besides the FOMC meeting, the rest of the US calendar comprises the ADP report, Markit Manufacturing PMI and ISM Manufacturing. Consensus is pessimistic about the releases. A negative reading in the ADP will add pressure on market as the NFP will take the scene even earlier than the Thursday ECB's meeting.

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