EUR/USD Moves Sideways, Drop Below 1.30 Seen

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This week so far has seen the EUR/USD pair move pretty much sideways after last week's surprise rise to 1.3170 levels.

Rise Against Expectations

Earlier last week, the pair went to a surprise high despite weak economic data from Germany and positive housing news in the US. It went through correction later in the week bringing the pair down to just about 1.305. It slipped further on Monday and has since seen a sideways movement until today. Risk-taking has been the name of the game so far, which helped push the EUR/USD to today's high of 1.3052. Current levels are at 1.3039 with resistance seen at 1.3084 and support at 1.2972.

Changes Expected

The mood may change, however, when the European Central Bank (ECB) announces its interest rate decision on Thursday next week. The ECB is expected to cut the interest rate by 25 bps from the current 0.75%. Analysts predict that an interest rate cut would be the catalyst that would finally sink the EUR/USD below 1.30. Because of this, expect a sell off of the Euro at the beginning of next week, if not earlier.

Weak Eurozone

Earlier today, Germany released the IFO Current Assessment wherein it saw a drop from the previous 109.9 to 197.2. Earlier consensus was that it would only fall slightly to 109.5. This announcement is another indicator that things still aren't that well in the Eurozone, which could further lower the value of the EUR/USD later in the year.

On the bright side, however, the Euro has done a good job so far at showing resilience against its struggling economy. Positive news in Italian politics, rising European equities, and Japan's possible purchase of European bonds have helped the currency for now. But whether or not it could bounce back soon enough after its expected fall is a different story altogether.

By FX Strategy Team, Published on 25th of April 2013
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