Week In FX Europe: Is The EUR’s Near Term Strength On Borrowed Time?
At present, the market is favoring being long the 17-member single currency. But, is the EUR bull worried with the current price action? So far investors remain content with the trade; however, further upside from existing levels may be a struggle – that depends on US politicking.A few techies are calling for a 1.40 handle in the near-term. They are basing this on some sound reasons like the US fiscal uncertainties and the general impact of technical levels as the market encroaches on its yearly high (February’s 1.3711). Mind you, once the US come back on line investors will again begin to shift their focus back towards the growth superiority of the US economy. Couple this with an ongoing dovish ECB and the EUR strength will surely begin to unravel.The impacts of the US government shutdown on growth prospects versus any upside surprises to fundamental data (stronger jobs report) will try and keep market volatility to the fore over the next few months. Last months “no” taper surprise has allowed the EUR to breach the mostly occupied tight 2013 range. Any ongoing worries about the US fiscal situation should remain dollar negative and G10 supportive for now and that remains in the House Republicans hands at the moment.
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