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25 Mar 2013
Forex Flash: Euro price action more constructive than fundamentals - BBH
FXstreet.com (Barcelona) - Marc Chandler, Global Head of Currency Strategy at Brown Brothers Harriman notes that EU(R price action is arguably more constructive that the fundamentals.
He notes that disappointing flash PMI and German IFO survey warns that the regional economy is still contracting here in Q1 (while in comparison the US economy looks to have rebounded back to its recent trend after a dismal Q4). However, he feels that the euro's resilience to the poor news stream is actually a favorable technical development. He writes, “We see a modest bullish divergence in the RSI, as the new low for the move early last week was not confirmed by the indicator. The single currency has scope to rise toward $1.3100-30 in week ahead.”
He feels that the caveat, which he highlighted last week, is worth repeating. He writes, “This year, more often than not, the euro has moved in the opposite direction on Monday than it did on the proceeding Friday. The wild card of course is Cyprus and the ECB's threat to no longer sanction any more funding from the Emergency Lending Assistance (ELA) on Monday if there is no agreement.”
He notes that disappointing flash PMI and German IFO survey warns that the regional economy is still contracting here in Q1 (while in comparison the US economy looks to have rebounded back to its recent trend after a dismal Q4). However, he feels that the euro's resilience to the poor news stream is actually a favorable technical development. He writes, “We see a modest bullish divergence in the RSI, as the new low for the move early last week was not confirmed by the indicator. The single currency has scope to rise toward $1.3100-30 in week ahead.”
He feels that the caveat, which he highlighted last week, is worth repeating. He writes, “This year, more often than not, the euro has moved in the opposite direction on Monday than it did on the proceeding Friday. The wild card of course is Cyprus and the ECB's threat to no longer sanction any more funding from the Emergency Lending Assistance (ELA) on Monday if there is no agreement.”