During the Asian trading session, the Euro held close to a 4-month high versus the U.S. Dollar, the rally subsiding somewhat as traders exercise caution ahead of Germany’s court ruling regarding the bailout fund and the U.S. Fed’s decision on easing.
As reported at 2:42 p.m. (JST) in Tokyo, the Euro was trading at $1.2761 against the U.S. Dollar, not far from Friday’s peak of $1.2815 and the EUR/USD pair is likely to continue to find support so long as optimism over Fed stimulus grows. Since late July, the pair has rallied more than 6% but is now facing resistance at the 200-day moving average. One currency strategist in Tokyo doesn’t think that the Euro will rise much beyond that if the 200-day MA is breached as there are simply not enough reasons for investors to go long.
The first hurdle that the Euro must overcome is due out tomorrow, when the German constitutional court will rule as to whether Germany can participate legally in the E.U. bailout fund. Analysts believe the court will not find the rule unconstitutional but worry that there could be conditions attached to the decision.