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USD consolidates in quiet holiday trade

The US dollar trades firmer overall, although consolidative moves predominate across the board. The euro remains within its Friday's range, although it saw some intraday volatility, jumping toward 1.3380 during the European trade, only to fall back to 1.3330 on Draghi's comments.

ECB President Draghi said in a conference at the European Parliament that the euro's exchange rate is an important factor in assessing the inflation outlook but isn't a policy target.

While the Loonie is among the worst performers, the yen weakened after the G20 statement said countries would refrain from competitive devaluation and would not target exchange rates for competitive purposed, but refrained from criticizing Japan. The Cable remains vulnerable, trading near 7-month lows sub-1.5500.

Looking ahead, trading is expected to remain subdued as US markets are closed due to the Presidents Day holiday.

"Although the G20 statements included a focus on exchange rates and could impact the speed of currency moves, we doubt the meeting will interrupt or reverse recent currency trends", says Nick Bennenbroek, Head of Currency Strategy, Wells Fargo Bank. "We expect the yen and the euro to weaken gradually against the U.S. dollar over time".

Euro steadies above 1.3300

After finding support at a 3-week low of 1.3305 last Friday, EUR/USD entered in a consolidation phase that has extended today amid low volume due to the US holiday. Despite some intraday volatility, EUR/USD is trading virtually unchanged on the day at the 1.3340/50 zone.

Short-term indicators have turned neutral to slightly bearish, while daily charts begin to look quite negative. However, the pair did hold above 1.3305 (38.2% retracement of the 1.2660/1.3710 rally), pointing that bears might lack momentum at this point and we can see some consolidation ahead. A break below 1.3305/1.3300 would increase the pressure exposing 1.3255 (congestion area) ahead of 1.3210.

On the other hand, EUR/USD needs to at least regain the 1.3450 where the 20-day SMA lies, to improve the outlook.

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