EUR Trading Outlook
The Euro (EUR) the ECB meeting saw interest rates held at 1.0% as expected but President Draghi was quite optimistic in his press conference noting there are tentative signs the European debt crisis is stabilizing. This combined with the positive Spanish auctions saw the Euro gain against every currency and shorts squeezed around the market. The positioning on the Euro is so short that some analysts are suggesting for a 300-400 pip relief rally in possible. Looking ahead, November Trade Balance forecast at -1.5bn vs. 1.1bn previously.
The Euro (EUR) the unnecessary use of the word cataclysm from rating agency Fitch when warning the ECB to buy more Bonds spooked the market sending the EUR/USD to fresh lows under 1.2700. The market then stabilized and managed a lackluster bounce in the US session. The ECB meeting tonight is very important and new measure could spark a short covering rally. Looking ahead, ECB Rate meeting forecast to hold at 1.0% vs. 1.0% previously. Attention on ECB President Draghi press conference afterwards.
The Euro (EUR) the markets took heart with Fitch comments that Germany’s rating was safe at AAA and France is unlikely to be downgraded in 2012 and only Italy is currently at threat of imminent Downgrade. The EUR/USD and EUR/JPY both enjoy a relief rally for the second day but gains were limited and the major found heavy resistance above 1.2800. The downside is still likely to be tested again before we can talk of the downtrend ending. Looking ahead, Final Q3 GDP forecast at 0.2 vs. 0.2% q/q.
The Euro (EUR) the market opened very weak on Greece default fears but then reversed in Europe on short covering and bargain hunting in crosses. EUR/JPY was below Y98 and even though Japan was on holiday’s demand was found and the pair rallied back above the figure into Europe. EUR/AUD is the exception holding under 1.25 and threatening to continue its dramatic fall.
The Euro (EUR) selling accelerated on Friday with the major testing 1.2700 before stabilizing but slipping to fresh all-time lows against the AUD. EUR/JPY selling also added to the downside pressure with the pair slipping below Y98 and still searching for support. More negative news emerged in weekend press reports that Greece was not reforming quickly enough and may have to leave the Eurozone if bailout funds are not received. Looking ahead, November German Trade Balance forecast at 12 vs. 12.6bn previously.
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