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FBS: outlook for EUR/USD

After more than a week of bearish correction the single currency returned to growth on Friday. The pair has found support on the H4 Ichimoku ($1.3470) and reversed to the upside, coming close to the September $1.3570 high.

In our view, it makes sense to buy EUR/USD on a break above $1.3570 with an initial target of $1.3600 (note that there is a bunch of sell orders concentrated there). Rise above $1.3600 could open the way to the 2013 high of $1.3715 (currently it is the bottom of the monthly bearish Ichimoku). This is a strong resistance area, so bulls need some extraordinary stimulus to push higher.

A failure to break above $1.3570 could cause a retracement to $1.3460 at least. For now one a weekly chart one may see a kind of a “hanging man” candle forming. Generally, such candle is a reversal pattern. So pay attention to how euro closes the week today. The next support is seen at $1.3435 (200-week MA) and $1.3415/00.

Next week’s economic calendar will be rich for potentially market-moving events for EUR/USD. US will release manufacturing PMI on Tuesday. Don’t forget that October 1 is also the deadline to fix the US “debt ceiling” – for now the world’s largest economy remains under a threat of default. Watch the ECB meeting on Wednesday (Draghi has made some relatively dovish comments recently) and the Fed’s Bernanke speech later in the day. US will release non-farm payrolls on Friday (see the details in the economic calendar).

Chart. Daily EUR/USD

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