Where is the EUR demand?

Everything is fine in the world if you are holding mostly “bear” dominated positions. With global equities seeing red for the third-consecutive day, its longest losing stretch in two-months and market rumors rife, has investors again coveting the risk reserve governing Yen.

This is a currency only a few trading sessions ago gave serious thought on extending an assault at 82 outright, a rate the BoJ would have been happy with, is now falling towards the rhetoric levels of concern by Governor Shirakawa of last week. Recent data from the US and Europe signaling slowing economic growth is hastening the currency return to lofty heights.

Market participants hearing and believing vague gossip, since being denied, about Greece extending its deadline for participation in PSI from this week to next has only fueled the speed of dominance by this safer-haven currency. Selling EUR/JPY outright this morning has triggered some stop-losses while the structure of the market has changed to bearish talk despite solid bids below. The fact that the markets continue debating the possibility of a Greek credit event should be able to maintain the underlying pressure on the single currency for some time further.

Long/Short March 6th

Euro data released this morning certainly is not currency friendly despite the numbers being in line with analysts forecasts. The second release of Q4 GDP from the Euro-zone has seen a confirmation of the -0.3% decline that was indicated in the first estimate. The data shows the same divergence as has been seen in the PMI data of late, emphasizing the weakness in the peripheral countries. Negative Euro-zone growth is likely this year and while the PMI’s have stopped the bleeding in the core, the same cannot be said for the peripheral countries where downside risks dominate.

Event risk is not being monopolized by the Greeks, its also high for AUD this week who have GDP and labor reports due for release, while in China, inflation, IP and retail sales will be published. Any weakness outright or by association and this currency will ease further. Despite the RBA leaving rates unchanged last night and regurgitating their February’s statement, the currency has been trading on the back foot with investors remaining weary of other regional fallout’s. It seems the market is not currently wearing the rose tinted glasses of the RBA. When risk takes a beating, so do the commodity and interest rate sensitive currencies. Can North America stop this mornings bleeding?

Forex heatmap

Other Links:
EUR Bloodied by China

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell