All Trade Ideas and trading scenarios found on FX360.com are hypothetical. FX360.com has not placed these Ideas in a live trading environment. Forex Trading involves high risks, with the potential for substantial losses that exceed your initial deposit and is not suitable for all persons. Past performance is not necessarily indicative of futures results.

EUR/USD - Closing in on 2012 High

Last updated 1/23/2012 9:39 AM ET (GMT -5) 0 Comments - Add your comment

• Share this:

Kathy Lien

Director of Currency Research, GFT

The price action of the EUR/USD this morning shows how much of an impact positioning can have on currencies.  Even though Greece failed to reach a critical deal with the IIF on Friday, the euro shook off earlier weakness to trade at its highest level in 2.5 weeks.  The 1.3000 level has been cleared with the EUR/USD quickly closing in on its year to date high of 1.3075.  The lack of progress in the Greek deal talks and weaker growth in France should have renewed concerns about the region's sovereign debt crisis and its impact on growth. However with EU Finance Ministers meeting in Brussels today, investors are still wearing their rose tinted glasses and holding out the hope that finance ministers will make their own progress by deciding on what terms of a Greek deal they are willing to accept.  At this point the drop dead date for a deal is the Jan 30th EU Leaders Summit. The rally in the EUR/USD implies that investors believe that a Greek deal is inevitable but I would be much more careful with this type of thinking because even key policymakers who are involved in the negotiations are not as optimistic.  With EUR/USD short positions at their highest level ever, we are seeing nothing more than short covering.  Whether you believe in a Greek PSI deal or not, the downward momentum in the EUR/USD is fading quickly.  The lack of major economic reports today means that headline risk will drive the EUR/USD and unfortunately this can lead to more schizophrenic trading in the euro.

The market's optimism and the lack of U.S. economic data this morning has kept the dollar under pressure as safe haven flows ease out of the greenback and move into higher yielding currencies. In North America, there was only economic data from Canada - leading indicators beat expectations last month, rising 0.8 percent against 0.6 percent expected.  However compared to the prior month, leading indicator growth declined which is an accurate reflection of Canada's economy - signs of health but with a cloudy outlook. Tomorrow night, President Obama kicks off the Election Year with his State of the Union Address and there is no doubt that it will focus heavily on the U.S. economy.  As important as the speech may be, the promises are not always fulfilled and for this reason, investors tend to take it with a grain of salt.  Instead, the big event risk for the dollar this week will be the Federal Reserve's monetary policy announcement on Wednesday. For the first time ever, the Fed will be releasing their forecast on Fed Funds rates.  The move is aimed at increasing transparency by giving the market a frame of reference but at the end of the day, it may create more confusion than clarity.  Wednesday will be a very active day in the markets with the FOMC statement released at 12:30 pm ET, followed by the interest rate forecasts and quarterly estimates for economic growth, unemployment and inflation at 2pm and then Bernanke’s press conference at 2:15pm ET.  

The information, including Commentary and Trade Ideas, provided on FX360.com should not be relied upon as a substitute for extensive independent research which should be performed before making your investment decisions. Global Forex Trading and FX360 .com is merely providing this information for your general information. The information and opinions presented do not take into account any particular individual’s investment objectives, financial situation, or needs. All investors should obtain advice based on their unique situation before making any investment decision and should tailor the trade size and leverage of their trading to their personal risk appetite. Any projections or views of the market provided by FX360.com may not prove to be accurate.

The views of the authors and analysts are not necessarily those of Global Forex Trading, its owners, officers, agents or other employees. FX360.com and the currency research team will not be responsible for any losses incurred on investments made by readers and clients as a result of any information contained on FX360.com. Global Forex Trading and the currency research team do not render investment, legal, accounting, tax, or other professional advice. If investment, legal, tax, or other expert assistance is required, the services of a competent professional should be sought.

Loading...

About The Author

Kathy Lien began her FX trading career 10 years ago at J.P. Morgan Chase. After graduating New York University’s Leonard Stern School of Business at the age of 18, Kathy joined the bank's interbank FX trading desk and eventually moved to the cross markets proprietary trading desk. In the interbank market, her ability to create solid fundamental and technical analysis from the myriad of information on the market helped her trade forex spot and options. Her experience eventually led her to be chief strategist at Daily FX where she worked until she joined GFT in 2008.

With her knowledge of forex, as well as her experience trading other products, such as interest rate derivates, bonds, equities, and futures, Lien has built a reputation as an international currency analyst. She is frequently quoted on CNBC, Bloomberg, Fox Business and Reuters. Lien has also written for publications like Active Trader, Futures, and SFO magazine. She is the author of the newly updated Day Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Boris Schlossberg.

To buy Kathy’s newly updated Day Trading and Swing Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, click here.