Euro Poised For Further Upside

Includes: ERO, EU, FXE
by: FXstreet

The bloc currency has kept its relief rally alive post-FOMC, although euro bulls were not able to push through the key mark at 1.3100, mainly because most of yesterday's (Wednesday) announcement by the Federal Reserve was already priced in. What really caught investors by surprise was the FOMC's adoption of numerical thresholds for both the unemployment rate and inflation, at 6.5% and 2.5% respectively. Ok, that was the boost via the weakness exhibited by its fellow American counterpart, the greenback.

… Rosy skies in Euroland

However, the scenario in the euro area lacks the usual somber news and worrisome indicators or events. Totally the opposite… so far.

Despite the initial obstacles posted by the German policy-makers, the EU officials have managed to put their difference aside and they seem to be ready to ratify the late agreement regarding the SSM (Single Supervisory Mechanism) at the EU Summit. Under the agreement, the ECB will assume the role of supervisor over mostly big banks in the eurozone and is likely to kick off towards the end of 2014. At the same gathering, the EU leaders look set to approve Greece's next tranche of financial aid, after the Hellenic Republic met its debt buy-back program targets.

In addition, the Spanish debt market continues to exceed expectations, surpassing its targets with a relentless decline in its bond yields.

This actual knee jerk of the EUR/USD seems to be ripe for a logical profit-taking session, mainly if we recall that the euro has been appreciating against the U.S. dollar since mid-November, when it used to trade in the vicinity of 1.2670.

Of note, however, is that the cross is almost matching the two previous tops of mid-September and mid-October above 1.3100, and considering that tomorrow the market participants are expecting better preliminary prints out of the key manufacturing PMI indices, the table appears set for further gains.

Technically speaking, the in-house Bullish Percentage Index has just passed the 50% threshold, indicating that 52.63% of euro-based pairs are now in bullish mode, applying the point and figure method.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.