After ECB and US Payrolls, the EUR/USD was hammered, erasing almost 100% of last 2 weeks gains. Both fundamental developments favored the slide, as the ECB, despite leaving its economic policy unchanged, considered not only a rate cut, but negative deposit rates. For the US a surprisingly positive employment reading, far above expectations left aside Fiscal Cliff woes. The pair however, stalled at 1.2880, a huge static support level, and currently bounces higher, aiming to close the week around the 1.2950 area.

So what’s next for the pair? From the fundamental point of view, the FED will be next risk factor: Operation Twist comes to an end, and further easing could be considered. Will it harm greenback, or finally prove its working and boost it? Whatever the outcome is, the fact is that the pair failed again to sustain gains above 1.3100, and there is a strong ceiling now in the 1.3130/70 area, that will likely held the upside for the rest of the month. The daily chart shows indicators turning lower still in positive territory, yet price holding above 20 SMA, which at the time being, means the downside will also remain limited, as the moving average stands around mentioned support of 1.2880. 

At the time being, the downside is favored, with a break below 1.2880 confirming a continuation rally towards 1.2745 next week, as the level stands for past June monthly high and the 38.2% retracement of the 1.2040/1.3170 run. A break below will confirm the midterm bearish bias and not before. Sustained gains above 1.2970 is what it takes now to see and attempt of recovery, yet expect selling pressure to increase if price advances above 1.3100.

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