EUR USD (1.4600) Christian Noyer issued the all-clear signal for the eurozone from Helsinki yesterday. His upbeat comments echo those of Ollie Rehn who spoke before the Council on Foreign Relations last week. However, the Bank of France governor admitted that the recovery may slow in the coming months as the eurozone works to reduce its debt burden. After setting a five-week high in the EUR/USD yesterday morning, forex traders reportedly tracked the DJIA throughout the rest of the day as the euro rose and fell in line with the index. Later in the day, Jean-Claude Juncker said that the euro is overvalued relative to other major currencies, apparently prompting some downward pressure on the single-currency. Meanwhile in the US, Philadelphia Fed’s Charles Plosser said yesterday that the US economy is in a gradual recovery despite Friday’s jobs data. Is the US on track for yet another jobless recovery?
One gets the impression that EUR/USD traders have little problem with the euro’s recent upward trajectory, as the one-month implied volatility has been sinking in concert. It now looks as if market participants are now considering a period of consolidation in the runup to Thursday’s ECB meeting. However, we reckon with a continuation of the trend, and will use the chance of a dip to 1.4530 to embark on a euro-bullish strategy to 1.4775. In the event, the risk-limit would be installed at 1.4480.
Market Bias Index
The changes to the Market Bias Index since the previous day were only marginal. The Swiss franc dominates the chart, and it is perceived as especially overvalued versus the US dollar.
Deutsche Bank