A spike of risk appetite took the euro and stocks higher on Wednesday as U.S. markets reopened after 2 days of inactivity due to the storm Sandy. The euro rose above 1.3000 against the dollar to a 6-day high of 1.3020, also helped by relatively benign eurozone data. However, as North American investors rejoin, the optimism started to fade with U.S. stocks retreating after a positive open.
Euro fails to hold above 1.3000
So another day and the same rangebound, directionless pattern persist for the shared-currency. Even though the short-term outlook turned more positive, the bigger picture remains unclear: EUR/USD continues to trade inside its 1.2800/1.3170 range since mid-September while Europe struggles to put an end to the crisis and U.S. is headed toward presidential elections. EUR/USD was last at the 1.2970 zone, still up 0.1% on the day.
The Rabobank analyst team notes that while risk appetite has lifted EUR/USD a little this morning, there is little reason to suspect that there will be enough impetus to push it out of its trading range. "Resistance lies at the EUR/USD1.3085 area ahead of 1.3150. The 200 day SMA is likely to act as support at 1.2834", they say.
In the same line, the TD Securities team observes that with another light data calendar today, there are not too many catalysts to direct further moves in FX land, which means the direction for "risk" generally-equities and commodities in particular-is likely to be the main focus for the majors in today's session. "Given that it is month end, bank year-end, and that liquidity will likely be light as U.S. markets ease back into play though, we are cautious of price action today", they add. Considering also that chatter for month end has been of a stronger bid for the USD, the recent risk rally could become challenged".
Looking ahead, the U.S. employment report will be published as scheduled on Friday but in the absence of surprises, it will probably have a limited effect on the EUR/USD.