View: EUR bounce has frail foundations, sell rallies leaning on EUR/USD1.2727
EUR price action has looked more constructive in recent weeks, having bounced to the 1.2407 resistance line at the start of the month finally punching through this on Tuesday amid on-going hopes that European officials were ready to be more interventionist in tackling the debt crisis. This speculation had culminated in a Der Spiegel article suggesting the ECB was looking at a plan to cap periphery yields at specified levels which has proven so exciting to participants that even ECB and Buba downplaying has been shrugged off. Indeed, the market is so optimistic that German 2-year yields brushed back into positive territory this morning as EUR/USD itself trades in the 1.2450/60’s, shrugging off a weaker equity market performance on the back of more worrying data out of Asia, specifically the Japanese trade numbers which showed an alarming 8.1% y/y drop in exports with sales to China falling at 11.9% and to the EU down an alarming 25.1% from a year earlier.
Full report below…
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