Global Currencies Trading In Tight Ranges ? Fx Empire Network

Global Currencies Trading In Tight Ranges

This morning global currencies seem to be leveling off as trading patterns are shifting. The jubilation from Mr. Draghi and supported by comments from IMF director Lagarde seem to be waning. The EUR/USD is making a correction dipping 1.3362 down a few pips; gold and crude oil remain in positive territory as most currencies are trading in tight ranges.

As the week began it initially looked as if markets would continue the same price activity from the end of last week. Asian equities took a strong start and the euro also jumped again north. EUR/USD filled offers in the 1.34 area and also the likes of EUR/CHF and EUR/GBP had moved beyond key resistance levels. EUR/JPY even touched the psychological level of 120. However, there was no high profile news to support additional gains of the single currency. So, markets had to look for a new equilibrium after the recent strong gains. This process continued throughout the day and was also visible in the equity markets and on the European bond markets. EUR/USD was already off the intraday highs and change hands in the 1.3350/60 area at the start of trading in Europe.

EUR/USD tried another run up, but a break of the top at 1.3404 was a too high hurdle. The equity rally also did run into resistance. The turnaround coincided more or less with the publication of slightly weaker than expected European industrial production data. The market simply had to digest the sharp moves at the end of last week. Later, investors turned more cautious on risky assets. EUR/USD dropped to set an intraday low at 1.3335 late in Europe.

Traders are looking at the economic calendar for direction with little news as President Obama tried to push Republicans into a deal and Mr. Bernanke?s address did little to support the markets but did ease the fear that the Fed would simply cut off asset purchases. The calendar in Europe contains few data events with market moving potential.

The US data might have more impact on markets as the Empire state manufacturing survey, the retail sales and to a lesser extent; the PPI might bring valuable information on the health of the US economy. We put the risk for the US data slightly to the downside of consensus. However, it is not evident to see the market reaction in such a scenario.

The market reaction regarding sentiment on risk is far less clear as it was a few months ago. In a day-to-day perspective, we think that yesterday?s consolidation pattern can be extended today. We have the impression that the risk-on rally might lose some its momentum ahead of the ?real start? of the earnings season later this week. If so, EUR/USD might fall prey to some further profit taking, too. However, for now we only see such a move as a technical correction and no indication of a U-turn in fortunes of the single currency. Odds are that the EUR/USD is overbought at the moment and set for a correction.

Source: http://www.fxempire.com/news/forex-news/global-currencies-trading-in-tight-ranges/

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