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Forex: EUR/USD completes 200 pips decline in two days but remains above 1.2950

FXstreet.com (San Francisco) - There's a mixed outlook for the EUR/USD according to the FXstreet.com Currencies Forecast as the banks are bearish while the traders are bullish following the tough week the market is closing. On Thursday, unexpected dollar strength rocked the markets with the USD/JPY breaking ferociously the 100.00 mark and shaking the majors.

One of the shaken pairs was the EUR/USD who collapsed around 200 pips in the last two days since Thursday highs at 1.3175 to reach the lowest level since April 5th at 1.2935. However, the pair managed to recover positions and it closed at 1.2990, below the 1.3000, but above the 1.2950 key support.

"Dollar strong comeback yesterday US session, has left price dangerously close to the base, with short term sellers aligned around 1.3050, and stops below mentioned 1.2970," comments FXstreet.com Analyst Valeria Bednarik. "If the level gives up, and even better the day closes below it, the figure will be complete, targeting the 1.27 area."

On Friday, the EUR/USD recorded a 0.6% daily loss, and a 1.1% weekly decline to close at 1.2990. According to the FXstreet,com trend index, the pair has closed the day strongly bearish in the 1-hour chart with indicators such as MACD, Momentum and CCI pointing to the south while the Stochastic is neutral.

What's next?

"Will EURUSD hold the 1.2950?" asks BK Asset Management's analyst Kathy Lien. "Data will tell" us, she answers the question. As EUR/USD closed below the 1.3000 it is significantly as bearish momentum is increasing. "If EUR/USD was meant to break below 1.2950, we believe it will happen next week as we've got a tremendous amount of Eurozone and U.S. data on the calendar," states Lien.

Below the 1.2950, 1.2920 and 1.2880 are today’s bearish target in the short term. "While once below 1.2880," comments Bednarik, "there’s scope for a retest of 1.2660, November 2012 monthly low."

Camilla Sutton, Strategist at Scotiabank, underlines the neutral outlook on the cross, arguing “studies are shifting from buy to sell, but signals are not yet concrete enough to enter short positions. A break below the 200‐day at 1.2992, the bottom end of the range at 1.2955 would open up selling pressure”.

But the pair closed just at 1.2990.

Looking into the upcoming week, "the EUR will be pushed back into the 1.20's if next week's Q1 GDP estimate shows another quarter of contraction and the market aggressively prices expectations of more rate cuts and unconventional easing by the European Central Bank", Ilian Yotov, analyst at AllThingsForex commented.

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