However, EUR/USD regained the 1.3000 mark and is headed to retest highs as market's mood swings continue to drive crosses. An upbeat reading on Chicago PMI helped to offset weak spending and income data, underpinning stocks and putting the greenback under pressure.
Trading has been choppy lately as investors react to mixed headlines out of Washington regarding progress in talks on averting the "fiscal cliff", when spending cuts and tax increases will come into effect in 2013. Meanwhile in Europe, Germany's parliament approved new aid measures for Greece, including the reduction of interest Greece pays on loans and the release of bailout funds.
So where do we stand?
Amid contradictory headlines on the US fiscal cliff, and light stream of news from Europe, the EUR/USD has seesawed this week. However, the pair holds a positive bias having risen within the last 3 days. A decisive break above 1.3020 would confirm the short-term bullish bias, paving the way for a rally toward 1.3100 and even 1.3170. On the other hand, this week lows at the 1.2880 region should contain dips in order to keep focus on the upside.
According to the TD Securities team, the EUR clearly continues to buck all signals on the fundamental front, poking a little more decisively above the 1.30 figure overnight despite a softer than expected Eurozone CPI and a record high Eurozone unemployment figure. "Positive technical signals continue to mount, so we continue to favour upside protection against a potential stronger surge", they comment.
On the other hand, Nick Bennenbroek, Head of Currency Strategy at Wells Fargo Bank holds a slight bearish bias for the cross but warns about next week FX drivers. "Investors are also watching U.S. budget talks closely and are inclined to take an optimistic view of those negotiations. However, the talks have not yet shown any concrete progress, with Republican’s yesterday rejecting President Obama’s initial tax-and-spending proposals as part of those talks", says Wells Fargo analyst. "We have a very slight bias to U.S. dollar strength and foreign currency weakness in the coming days, though also acknowledge that U.S. budget talks, nonfarm payrolls and the Federal Reserve’s monetary policy announcement will likely be the key FX drivers in the near-term".