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Euro flatlined at 1.3000

The sensations surrounding the shared currency remain far from auspicious, as the prevailing bearishness has been accentuated following mixed data from the bloc’s industrial sector which is still submerged into the contraction territory, despite falling less than expected during January. In the same grim territory, Italian short-term bond yields are ticking higher, despite the positive takeout in today’s auction. Now, if this is the spark euro-bears were longing for is still to soon to tell, although further signals would be lying ahead in order to confirm whether further and deeper pullbacks are yet to come.

… US data could be key

in the absence of relevant news or events coming from the euro zone, anxiety amongst market participants is building up ahead of the US Retail Sales, where consensus estimates a monthly expansion of 0.5% in both readings. Better-than-expected prints would carry the potential of another bull run in EUR/USD adding upside pressure to the risk appetite. However, and in light of the recent outperformance of the US economic indicators, any improvement has intensified traders’ hopes of the Fed exiting prematurely its ongoing QE programme, adding buying pressure to the greenback and plotting against any upside attempt by the euro. In the meantime, the US ‘sequester’ - a decisive factor that can keep the current stimulus going on for longer, and thus hurting the US dollar - remains dormant for now.

From the technical perspective, the cross continues to navigate within the down-channel set from 2013 highs and testing January’s lows; while the RSI is still off the oversold territory, inferring that there is still room for further downside.
The initial support lays at 1.2956 (2013 lows March 8th), ahead of 1.2949 (200-day moving average). A breach of which would accelerate the descent towards the area around 1.2880/85, where converge the 50% Fibonacci retracement of the July 2012 – February 2013 upside and December lows. Longer-term, the area of 1.2680/90 (November lows, 61.8% level and bottom of the channel) would contain further pullbacks.
On the upside, the first hurdle emerges around 1.3070/85 (38.2% retracement and March 12th high), ahead of 1.3105/35 (top of the down-channel and March 8th high) and then 1.3185, home of the 100-day moving average.

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