Euro bulls are imposing their might on Wednesday, after a sudden burst of risk appetite has pushed the single currency above 1.3000 mark, relative to the greenback; however the reasons behind the consequently firmer tone in EUR/USD are still unclear. There were no upbeat results out of the eurozone that could have justified such a move. Moreover, markets have traded unbiased overnight and minutes before the opening bell in London.
So, here we are once again: euro is marching north, though nobody really knows why! Fundamentals are pointing in the opposite direction, however markets do have their own psychology, do they not?
… Temporary, or long-lasting break?
Of course, this euro comeback to the 1.3000 region merits the "million dollar" question whether this up-move is framed within a sea of new buying orders than can effectively propel the shared currency far above the psychological mark, or it is just another fruitless attempt of reaching higher ground before reality devours it.
With Greece talks about the new austerity package in the headlines, analyst Derek Halpenny at BTMU comments "experience tells us all that we should expect some deal in November, which will help support near-term confidence to a degree. But even assuming best case scenarios in regard to muddling through, growth is weakening in the eurozone and hence the upside for the EUR/USD rate remains very limited indeed". Karen Jones, expert at the German lender Commerzbank, gives credit to a retest of the zone at 1.3025/45 in the upcoming sessions, but she warns, "we would expect failure here and consider that attention remains on the 1.2803/34 (200 day ma and October low). Failure here would be viewed as negative, and target 1.2472/33".
The Bullish Percentage Index at FXstreet.com continues to navigate below the 50 threshold, however evidencing a slight upside, showing at the moment that 42.11% of euro based pairs remain in bullish mode according to point and figure charts.
In the very near term though, markets are anxiously waiting for the reopen of the U.S. markets, after two days of inactivity because of the Hurricane Sandy. Bouts of volatility and fireworks would be almost guaranteed, as the month-end flows would also add to the equation.
… Empty docket for the EU tomorrow
Action on Thursday will kick in with the "official" NBS Manufacturing PMI in China, expected to return to expansionary levels above 50 and putting risk trends to the test, ahead of the Swiss SVME PMI and retail sales in the Alpine economy. Manufacturing PMI in Greece will close the euro calendar, preceding the U.S. ADP employment report, manufacturing PMI, ISM Manufacturing index and the weekly report on the labor market.