Euro on autopilot as FOMC minutes loom (Barcelona) - The single currency continues to trade in a narrow range this week, despite edging above 1.3000 after last week’s ECB decision and poor US jobs report.
Last night’s speech by Fed Chairman Bernanke highlighted the fact that the Fed is in no rush whatsoever to scale back or halt the ongoing QE programme in the near or medium term, supporting the EUR/USD. Furthermore, the cross should find extra support as Japanese investors look to be starting to take advantage of the increased and cheap liquidity pumped by the BoJ, seeking higher yields outside the domestic borders.

… 1.2900 the line in the sand?

As long as the cross navigates above the key 200-day moving average in the boundaries of 1.2900, the upside should remain alive. The euro docket ahead in the week would pose no downside threat a priori, being the potential market-movers the above mentioned FOMC minutes due tomorrow and the US retail sales due on Friday.

The political noise surrounding Italy, Cyprus and Portugal as of late seems to be dying off as these fronts remain curiously (dangerously?) quiet. Fair is to say that any progress in the direction of some sort of government in Italy would be another source of euro strength, although the triad of protagonists – Bersani, Berlusconi and Grillo – continues to debate the matter within their own parties, leaving President Napolitano and the entire Italian population scratching their heads.

From a technical perspective, the cross is extending its trading beyond the downtrend channel set from February highs above 1.3700 and hovering over March highs at 1.3050 (March 25th). The immediate hurdle awaits around 1.3075 (38.2% Fibonacci retracement of the July 2012-February 2013 upside), en route to the region of 1.3100/20, where sit the March 15th high and the 38.2% retracement of the February-April slide.
On the flip side, support levels align at 1.2890/95, where sits the 200-day moving average, reinforced by December lows around 1.2880/85. A dip beyond that would expose the region of 1.2660/80, where converge the 61.8% retracement of the summer’12-February’13 ascent and November lows.

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