The euro has kicked off the trading week with the back foot as bearish sentiment around the single currency seems to be entrenching and accelerating, as demonstrated by the apathy by which the euro traders have taken the improvement in risk trends.
Two risk-sensitive factors have unwound positively over the past weekend: trade surplus in China, posting a promising 11.6% rise in exports, has widened during October, allaying specters of a "hard landing" in the Chinese economy. Usually, this type of data boosts appetite for risk-associated assets and high-beta currencies, extending its effects to the euro among other currencies. Secondly, more relevant at these moments and definitely more expected: the Greek Parliament has given the green light to the new austerity package, paving the way for the next tranche of financial aid. Of course, uncertainties remain surrounding the country, as the "troika" report is yet to be released with unclear conclusions, dissenting politicians are either resigning or expelled from their parties amidst an overarching background of swelling social unrest.
All in all, good news that a priori were euro-positive just passed by almost unnoticed, and they did not echo in the euro's price action, at least not as it was mean to be. Euro bears are taking over the FX community, that's the reality today … for how long still remains unsolved, but in the meantime market participants continue to look for any catalyst that can curb the pessimism in EUR/USD. The Eurogroup meeting in Brussels would certainly not be the game changer.
… What lies ahead?
The bloc currency is trading in levels last seen in early September, challenging the key support of 1.2700 after the failed attempt to follow through the September high in the vicinity of 1.3170, and the October top around 1.3130
Karen Jones at Commerzbank believes the cross can target the area at 1.2480 by the end of the month, derived from technical studies (broke down from a symmetrical triangle). "The triangle break down point is expected to offer resistance at 1.2884 and we would expect prices to be contained by the near term downtrend at 1.2926".
… Ecofin meeting effects would remain on Tuesday
The aftermath of the finance ministers' meeting looks to linger amongst traders on Tuesday. In the data front, inflation figures in Spain and Italy will follow, preceding the more significant ZEW Survey in both Germany and the euro composite, gauging investors' sentiment in the near term.