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Euro Rallies Ahead of German Vote on EFSF

Last updated 9/29/2011 3:11 AM ET (GMT -5) 0 Comments - Add your comment

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Boris Schlossberg

Director of Currency Research, GFT

The euro rose in a sharp short covering rally in late Asia as investor optimism improved ahead of the key EFSF vote in the German Parliament today. Markets expect Angela Merkel’s ruling coalition to support the measure to expand the EFSF with many of the left of center opposition members joining the vote.

Earlier in Asia EUR/USD was driven lower by risk aversion flows as US equity markets ended near their lows, and the pair looked like it was going to break the 1.3500 figure at the start of Tokyo open. However,  the pair found support and staged a strong turnaround breaking above the 1.3600 level as markets anticipated string majority support from the German lawmakers.

The pair continues to remain rangebound between the 1.3500 and 1.3700 level as markets look for some clear resolution to the EZ sovereign debt crisis. Today’s vote in the Budestag while going a long way towards assuaging those concerns may not be enough to propel the euro beyond those recent range parameters.  As we noted earlier, the currency markets will need to see further reassurance on Greece before EUR/USD can stage a more meaningful recovery towards the 1.4000 level.  For now the pair looks to target the 1.3700 barrier if EU traders can sustain the optimism from Asian trade.

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.