EUR/USD (1.4415) Alan Greenspan gave the EUR/USD market a mild shock yesterday when he announced that ‘the euro is breaking down’. The former Fed chairman suggested that the cultural and economic divide between northern and southern Europe is simply too great, and that the reason the US economy is so sluggish is because of this uncertainty. Mr Greenspan apparently underestimates the unbroken will of the eurozone’s politicians who seek to preserve the monetary union. Moreover, while laying blame on the eurozone crisis he manages to omit the US economy’s homegrown problems. Meanwhile, currency traders found some hope in the publication of fundamental data yesterday. The PMI figures in China and the eurozone could have been worse, and there were no ugly surprises in the US new home sales report. On the other hand, the economic news doesn’t present a very rosy picture, and various traders hoped that this would argue in favour of more quantitative easing. Nevertheless, we doubt that Chairman Bernanke will announce any such monetary easing on Friday, and such recent data will likely not cause him to alter his prepared speech. Besides, any QE would have to be larger than the ones before, as the markets have by now grown accustomed to them.
The euro’s tumble yesterday wasn’t really very remarkable: it merely established a new consolidation zone between 1.4110 and 1.4515. The hurdle at 1.4590 serves as the trigger for upside momentum.
Market Bias Index
The Japanese yen presently carries the most overvaluation bias, and the Canadian dollar is now perceived as the most undervalued currency, although the respective biases are relatively moderate.
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http://www.easyforexnews.net/wp-content/uploads/2011/08/daily_forex_110824.pdf
Deutsche Bank
Fixed Income Research – Global