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Euro Continues Slide on Fears that QE is Coming

Last updated 4/10/2009 7:42 AM ET (GMT -5) 0 Comments - Add your comment

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Boris Schlossberg

Director of Currency Research, GFT

Top Stories

• Japanese PM entity may invest directly into stocks
• Treasury askled banks to keep quiet on stress tests during earniings season
• Nikkei mildly up Kospi up 0.94% as rest of Asia closed for Good Friday
• Oil at $52.40/bbl
• Gold at $881/oz

Overnight Eco

• JPY Monetary Policy Meeting Minutes
• JPY Bank Lending 4.2%
• JPY M2 Money Stock 2.2%
• EUR French Industrial Production -0.5%
• EUR French CPI 0.2%

Event Risk on Tap

• USD Federal Budget Balance expected at -147.5B

Price Action

• USD/JPY ran stops at 100.72 but faded as night wore on
• AUD/USD remained bid at 7150 on risk appetite flow
• GBP/USD holds 1.4600 in quiet holiday trade
• EUR/USD rans stops through 1.3100 but rebounded on better French Industrial trade data and ahort covering

A very quiet night of trade in the currency market with both Europe and North America closed for Good Friday holiday. With little event risk on the calendar trading was dominated by stop running in Asia and short covering in Europe as the EUR/USD& nbsp; remains weak relative to the rest of G10 in the wake of comments by  Jean Claude Trichet that rates may go lower and quantitative easing may begin.  

Stop hunting in early Asia pushed USD/JPY to 100.72 but the rally faded as the Nikkei gave up most of its gains after Sumitomo Mitsui FG revealed  that it expects a Y390 Billion loss for the last fiscal year,  Meanwhile bears were able to push EUR/USD through the 1.3100 handle to the downside – the first time the pair traded at that level since March 18th - but short covering in Europe brought the unit back above 1.3200 helped by better than forecast French Industrial Production data which printed at -0.5%  vs. -1.0% projected.

The EUR/USD has now given up almost all of its gains since Fed’s March 18th announcement on quantitative easing  as the data from the EZ continues to shows deterioration and the ECB is forced to consider similar measures in order to stimulate demand.  The ECB has been the only  G4 central bank   to resist QE policy and that reluctance has been the primary factor of support for the currency. With Mr. Trichet indicating that non conventional measures will be coming, euro’s slide could continue into next week with 1.3000 now clearly in bear’s sights.

Barring any fresh geo-political news, the North American session promises to be even more glacial than European trade as all capital markets are closed for the holiday today. With Europe also closed on Monday,  trade could be slow at the start of next week, but as the week progresses the event risk calendar becomes considerably more croweded and traders should be able to get a much  better understanding  on whether global demand has finally picked up.

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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.