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Euro faces renewed selling pressure

FXstreet.com (Barcelona) - The shared currency is now threatening below the psychological limestone at 1.3000 at the beginning of the trading week, whilst the ongoing USD rally seems to cap any attempt of recovery to or through that key level so far. The previous range delimited by 1.30 and 1.32 seems thus to be broken.

… Fed, ECB, yen

While the vast majority of the FX community was contemplating the bear toy was safely back in the box, fresh 5-year lows from the labour market data gauged by the weekly Initial Claims in the US economy seems to be the spark that initiated a quick and steep ascent in the greenback. However, the positive trend in the US employment was only an excuse, apparently, as rumours were hovering over the markets involving once again the likeliness of the Fed thinking about slowing down the current QE programme. The key issue as of yet remains the timing, although the market chatter was placing it quite earlier than investors previously thought.

In the meantime, the US debt markets were the main target of the hunt for yields carried on by Japanese investors last week, being the main witness the surpass of the USD/JPY beyond the triple-digit resistance and printing multi-year highs at the same time.

Traders have increased their long USD positions in the last week, unveiling renewed confidence in the greenback and contrasting to the descending trend seen in previous weeks.

The combination of the issues above mentioned plus the recent rate cut by the ECB simply do not bode well for the single currency at all, exposing further weaknesses below the key 200-day moving average around 1.2995.

At the moment the EUR/USD is hovering over the 1.2970/80 region, trading almost unchanged from Friday’s close.
If the soft tone persist, which would be most likely at least in the near-term, the immediate barrier south would emerge around 1.2950/60, where converge the 23.6% Fibonacci retracement of Feb-Apr decline and the uptrend set from April lows. Clearance of that area would then target 1.2910/20 (cloud base) ahead of 1.2830/40 (October 2012 lows) and 1.2740 (2013 lows).

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