The market sentiment remains slightly negative as US earning session gets underway. Worries about company results drove investors to safer assets. European stocks were lower, but US indexes opened nearly unchanged, and a quiet earnings calendar today will provide no catalyst in this respect.
Going forward, the Federal Reserve's Beige Book of regional economic conditions will be the highlight of the day, due for release at 18:00GMT. Today's meeting of Spain's Mariano Rajoy and France's François Hollande in Paris is a bit of a non-event for the FX market.
Euro holds above technical supports, still vulnerable
The euro has steadily retreated since hitting a high of 1.3072 last Friday, having reached a 1-week low of 1.2834 on Wednesday. However, EUR/USD has managed to bounce from lows and was virtually unchanged on the day at the 1.2880 zone.
The single currency is now sitting just above key support at the 200-day moving average of 1.2825 and the bottom of its recent range at 1.2803. While a break below 1.2800 would leave it vulnerable to more falls, the upside seems quite limited at the moment. "A lack of progress on any of the key issues the market is watching (Spanish aid request, banking union, decision on Greece) leaves the tone negative", said the TD Securities team.
From a wider view, the Commerzbank analyst team notes that the USD seems a better choice for traders. "In this limbo between a US economy for which 'QE3 plus' has become less likely thanks to the surprisingly solid labour market report last week and a euro zone which is still not agreeing on the conditions for peripheral countries which want to enjoy unlimited ECB interventions the greenback seems the better choice for many", they explain. "Once again the half-life of European rescue efforts is taking effect, which makes way to disenchantment after a few weeks".
However, EUR/USD jumps should not be dismiss, especially if Spain requests a bailout and triggers the implementation of the ECB's bond-buying program (OMT), whose uncertainty has kept many investors on the sidelines these days.