EUR/USD Regenerating Before Huge Week – Falls to Come?

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As the JPY and CAD seem to have taken the spotlight today, one wonders wht about the EUR as we approach the end of the trading week. Is the movement, or rather non-movement today simply a “pause that refreshes”? Or is the “bloom off the rose”? To many traders are involved in trading the EUR so it must be a Friday pause to regenerate for next week.

And next week the two “mega” central banks meet in the same week!! The FED meets on Tuesday and Wednesday the ECB meets on Thursday. The questions on everyone’s minds are; when will the FED end or reduce QE3 and when will the ECB cut rates? Thes are two of the more dominating questions in the FX market at present. So, what is the answer. The easy answer is “not yet and Thursday”.

Short term economic development on both sides of the Atlantic will weigh on this decision and at present those developments have been disappointing. The more obvious move is for the ECB to lower rates and most economists expect that to put pressure on the EUR.

But the US labor market had better rebound next Friday when non-farm payroll numbers for April are released or else the pressure on the EUR will be replaced by pressure on the USD.

It has become pretty clear that overall the US ecoomy is improving ahead of the Eurozone economy in terms of momentum. The negative numbers in Eurozone releases are far more than US releases. If the ECB lowers rates this week, and the FED signals an end is in sight for QE3 at this meeting and if the payroll number improves from last month, that should point to a lower EUR in the medium term.

There is a domino effect here. A weaker EUR will probably see a stronger JPY, CAD and GBP. Next week should be interesting.

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About Author

Matthew Lifson is a Foreign Exchange Trader and a Market Analyst. with Cambridge Mercantile Group.

2 Comments

  1. Forex Trading on

    Where to trade? my stop loss just tripped yesterday on my trade of USD/JPY Jpy just tripped my stop loss making me lose 90 pips, this is the second time the JPY has done that to me. I hope I would be in the right place and position next week to make the right trade at the right time this time around, I’ll trade the EUR/USD pair.

  2. Did you mention the word “Hope”? You can’t trade on hope! get in touch with me and I’ll make you an offer you cannot refuse ( and it won’t cost you a cent).