EUR USD (1.3320) The early weakness in the euro yesterday was accompanied by a popular perception of a divergence between the US and eurozone economies. Those bearish on the euro were provided with ample fuel for their views. For example, worries increased about peripheral eurozone debt issues, notably, the slow pace of overall growth on the European continent which would adversely affect the debt trajectory of the states in question. In contrast, there were more positive assessments of the US economic situation. A report from the OECD confirmed the divergence, showing projected US growth for the quarter at 2.9%. Investors also pointed to the EU finance ministers’ meeting which begins today. A discussion over the firewall will take centre-stage. However, as Germany and France diverge in opinion over the necessary amount to allocate, this has been seen as negative. Advocates of a high-as-possible firewall see it as a partial solution to the eurozone problems as it gives sovereigns much-needed time to redress public debt, as well as instil confidence in investors to provide debt at a lower cost. Euro-sceptics fear this firewall will not be built. Even with the negative sentiment against the euro yesterday, lasting downward pressure did not materialize and the currency climbed again overnight. We took advantage of Thursday’s dip to embark on a bullish strategy with a risk-limit at 1.3230 and a price target at 1.3410.
Click here to read the full report: Daily forex 03.30.12
Deutsche Bank