One minute it looks incredibly offered. But wait; the next moment people can’t buy enough!! Is risk on? Or is risk off?
Depends what day it is, and for that matter lately what time of day it is. Over the last few days, it seems we have exhausted ourselves trying to figure out the direction of the single currency.
This morning, we looked to breach support at 1.3020 as rumors made the rounds that the French Bank, Societe Generale had suffered big losses. In fact, their stock price fell 6%. Once the markets found that these rumors were false, it was off to the races as the market looked like it would surely breach 1.3100.
But that was not to be the case and once again the EUR has drifted off to the 1.3050-60 area.
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So what is the real story? Is the EUR in trouble as yesterday’s comments from Bundesbank President Weidmann stated? Or is the single currency and Euro economy primed to rebound in the second half of 2013, as ECB President Draghi seems to intimate each time he speaks? Is anyone paying attention to the US economy or are we all only concerned with quantitative easing. According to the Beige Book, released yesterday, though no one seemed to notice, the latest indicators show the US economy is in better shape than the Euro economy.
The debate continues as to whether the stimulus package in the US will begin to lessen as we move forward. The USD came under severe pressure when QE began. Isn’t it logical that the USD would show some strength if QE begins to slow down?
At the end of the day, the technicals seem to be directing the moves in the EUR. Support shows at 1.3000, but a break below could see a move towards 1.2965, the 200 day MA. On the other hand, a clear break of 1.3100 would see a move towards 1.3160, then 1.3200.
As we head into Friday, the G20 meeting concludes and it looks as if nothing exciting will come of that. The IMF meets this weekend and they may have more to say about the world economy. If the G20 does not go after Japan, and it looks as if they won’t, for weakening the JPY, we could see a resumption of JPY weakening next week. That could benefit the EUR as cross-buying in the EUR/JPY could help the EUR stay bid.
Either way, please remain strapped in and seated until the ride comes to an end.
Further reading:Â Gold Moves to Correct after Plunging to Major Support
