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Jeremy Frommer, CEO of Hedge Fund LIVE Jeremy Frommer has 20 years of industry experience and is currently responsible for general management and leadership of the General Partner. Previously, Mr. Frommer was a Managing Director and Head of the Global Prime Services Group (“GPS”) at RBC Capital... More
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  • Why is the EUR/USD (FXE) heading higher?  0 comments
    May 25, 2011 9:54 AM

    The EUR/USD pair has been trading in tight channels over the last 48 hours. After diving to new monthly lows on Monday at 1.3970, the pair sprung up in an apparent recovery.  The price movement was a surprise after Monday’s poor data:

    French Flash Manufacturing PMI: 55 actual v. 57 expected (higher is better)

    German Flash Manufacturing PMI PMI: 58.2 actual v. 61.2 expected

    Flash Manufacturing PMI: 54.8 actual v. 57.6 expected

    Flash Services PMI: 55.4 actual v. 56.6 expected

    The “Flash” data is a prelude to the “Final” version which is released one week later. Above 50.0 indicates industry expansion, below indicates contraction. The data is a leading indicator of economic activity and is constructed from a survey of about 600 purchasing managers.

    Other important data released on Tuesday had little effect on the pair. The German Ifo Business Climate was better than expected 114.2 v. 113.9 (don’t forget the data from Monday though) and New Home Sales (NYSEARCA:USD) were better than expected 323K v. 305K. Lately housing data has had a larger effect on the dollar, so it is interesting that the currency pair barely moved on this.

    The reason this is important is that the currency pair rallied on poor data in a downtrend. This can imply that investors were covering long positions momentarily. The USD did not release any strong or weak data to manipulate the pair into moving. The chart belows shows the channel trading in the EUR/USD from this week.

    eurusd, euro, usd, currency, dollar, trading, hedgefundlive, daytradewell, fundamental, technical, fxe

    Channel trade broken

    * Check out Day Trade Well’s daily newsletter The Daily Technician, including over 30 support and resistance ideas every morning! Find it every morning under the Analysis section on HFL.com and sign up to receive the email every morning.

    DayTradeWell.com and HedgeFundLIVE.com

    Author contact: eric.kelly@hedgefundlive.com 
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