Fundamentals will determine the new range

Last week we saw a very strong move by the USD, followed by a confirmation that the trading range had changed, and it seemed that we are Trending (moving towards a certain point without stopping). It is now time to see whether we will continue trading below 1.4800 or if Euro bulls will change the scenario and take us back over 1.5000. Fundamentals for this week support the idea that the market will remain calm before taking further action to either side.

We begin the week with Euro Zone Trade Balance, this number came out weaker than expected. Finally we’re seeing the effects of a very strong euro weighting on imports and exports. This could translate into a strong unwillingness from ECB to see EUR/USD reach 1.60 again. Tuesday will bring German and Euro Zone ZEW Surveys, both very important as they give us the current sentiment. Later that day we get US PPI and Housing Starts. They read pretty normal so no big news on the US side. Wednesday brings BOE Minutes if you’re interested in the GBP. On Thursday we see Philly Fed Index, this number is becoming more and more important lately as the market has followed it closely and acted on what it reads. Finally on Friday we get Euro Zone Current Account and Ben Bernanke speaking about financial stability. This represents the opportunity for him to further influence the USD into a stronger stage. He could easily mention that this appreciation is what they were intending for and hoping it gets further on the south side of our graphs… but this might actually trigger the RANGE we are looking for in the couple weeks/months.  (if B.B. suggests this was what they were looking for, the market might take his words as if this price is now “ok”, and we begin the Range Trading between 1.46-1.52).

On the technical side we see that EUR/USD has broken below the horizontal channel. We’re now upon the task to determine the new trading range. The previous one was 1.54 -1.60, now were looking at something close to 1.4700 1.5100. But this could easily change 100 to 150 pips in either direction during this couple of weeks as the market readjusts to the current move.