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Forex: EUR/USD remains trapped around 1.3100 despite Draghi's siren calls

FXstreet.com (San Francisco) - The Euro performed its second negative day of the last seven on Monday. Against the Dollar, initially it traded higher and reached intra-day high at 1.3140 but it was rejected towards sub 1.31 prices throughout the European and American session. Overall, the Euro was hurt by Draghi's concerns about the economic recovery in the eurozone core countries.

Now the EUR/USD is trading around 1.3075 in consolidation mode. However, the pair is strongly bullish with indicators such as MACD, CCI and Momentum pointing to the north while the Stochastic signaling neutral in the 1-day chart. On the flip side, resistance levels line up at 1.3160 (high May 3) followed by 1.3220 (high May 2) and finally 1.3243 (high May 1). On the downside, 1.3030 and 1.3000 seems to be important supports but the key is the 1.2950 frontier.

"Despite the intraday movements," points FXstreet.com's analyst Valeria Bednarik, "Monday has added no definition to EUR/USD trend: the pair continues in its 1.30/1.32 range as it has been for nearly a month already."

Earlier in the day, the ECB president Mario Draghi explained that the recent rate cut had been carried out due to the economic slowdown which now affects also the core Eurozone countries. He added that the central bank was ready to act again, should the need arise.

As well expected, Draghi was pressuring the euro to the downside. As WorldWideMarkets's analyst Joseph Trevisani affirmed recently in his Twitter account, "for the ECB to save the euro it must save the Eurozone from recession. To do that the euro must fall, hence Draghi's repeated comment today."

But the Euro remains reluctant to fall.

EUR/USD next: The game continues

Despite the Draghi's siren calls and attempts to originate a euro fall on headlines, the single currency remains unchanged against its major competitor with the EUR/USD is currently at 1.3075 after bouncing at 1.3050. According to the Commerzbank, the EUR/USD needs a break below 55-day MA to confirm trend reversal lower.

Commerzbank analyst Karen Jones believes that a fall through the 55 day moving average at 1.3027 is still needed to confirm a trend reversal lower, though. “In this case the 1.2977/54 support area (24th April low and the 200 day ma) will be in focus”, wrote Jones, adding that failure here will concentrate efforts on to 1.2839 (78.6% retracement of the move up in April, then the 1.2740 recent low).

Among these lines, Valeria Bednarik believes that it is matter of time for the EUR/USD to fall. Specially with the risk of more negative 'headlines' in the euro leaders' mouth. BK Asset Management's Kathy Lien agrees with Bednarik as she points that "the 1.30 level may appear to be rock solid support right now but between the ECB's bias to ease and the risk of more disappointments in the coming month, it should only be a matter of time before this level is broken."

However, the TD Securities team still looks the pair as generally range bound. "Overnight price action was particularly narrow, and with a lack of momentum and a dearth of clear catalysts in the coming days, more range trading should remain the prevailing trend".

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