A Boring Few Days for the EUR/USD

Yesterday, EUR/USD traders were looking for a new equilibrium after the Greek bailout deal. There was no euphoria on the agreement. On the stock market and also in EUR/USD  there was even some kind of “buy the rumor sell the fact” reaction. EUR/USD didn’t succeed a test of the 1.3322 range top. The markets continued all day to show worries and reacted to rumors. There was little else in the way of new or economic data.

 Yesterday morning at the open of EU markets, it was already clear that there was no excitement on the Greek debt deal. The reaction on Asian equity markets was limited and the spike in EUR/USD after the announcement of the agreement was short-lived.

 There was more response to the news from China over the weekend then there was from the Greek agreement but this was confused by the US markets being closed for a holiday.

 This lack of reaction on both the shares and currency market might have been due to different factors. Firstly, even after the deal there are still several issues on Greek debt sustainability. There is also a big execution risk. On the other hand, yesterday’s price reaction might be an illustration that Greece was/is not that much of an important issue for trading on global markets anymore. Both factors might have been in play. We consider it more as some kind of ‘buy-to-rumor, sell the fact’ re-positioning.

 The correction was continued in early US trading.

 EUR/USD dropped to the 1.32 area early in US trading. There was no important macro news from the US and EUR/USD hovered up and down in the mid 1.32 area. The pair closed a rather uneventful trading session in the 1.3234 area, little changed from the 1.3243 level on Monday evening.

 Today, attention of markets might move away from Greece and look for other issues.

 The Chinese HSBC PMI of the manufacturing sector was still just below the 50.00 mark, but Asian stocks are mostly in positive territory. In the EMU, the advance reading of the February PMI’s is interesting. The markets expect a further improvement; especially for the index of the manufacturing sector (services were already higher last month). The data might be cautiously supportive for risk taking on the European markets and for EUR/USD.

The US existing home sales will probably only be of second tier importance. So, we might see more wait-and- see behavior in EUR/USD. Technical considerations might play a role, also….

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