By: Barbara Zigah
In Asian trading, the Euro held close to a 2½ month peak against the U.S. Dollar, given a lift from unexpectedly improved German IFO business sentiment which promoted traders’ short covering. On Thursday, the Euro rallied 1%, finally breaking through the 90-day moving average, but will likely hit resistance ahead of $1.35, likely seen at $1.3460. As reported at 12:59 p.m. (JST) in Tokyo, the Euro was trading at $1.3372, only pips away from late trade in New York.
Earlier in the week, dismal PMI data gave rise to worries of a Euro-area recession, but the news yesterday that business sentiment in Germany, the Eurozone’s economic driver, was much improved raised hopes that Germany could avoid a recession which could ultimately help to pull the Eurozone away.
Currency strategists agree that most traders wouldn’t want to go long with the Euro, expecting that weak fundamentals will compel the ECB to pursue an even more aggressively accommodative monetary policy for a period longer than the norm and that will put the Euro under even more pressure. Next week, another of the ECB’s LTRO will take place, and analysts expect that demand could well exceed – double or even triple – the LTRO which was just shy of €500 billion.
Euro Set to Resume Rally
Barbara Zigah