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Euro Defies Gravity

Favorite trading pairs, the Aussie against the US dollar (AUDUSD) and gold against the US dollar (XAUUSD) are taking a breather at the moment. The pair often used for benchmarking purposes, the Euro against the greenback (EURUSD) is behaving as if all were sweetness and light in those countries that use the Euro. However, all is not sweetness and light there and the ability of the pair to hold its position in the 1.28 to 1.30 area is nothing short of uncanny unless, of course, central bank (ECB) forces are at play.

Economic indicators in the US are much stronger than the Euro zone as a whole while individual member states, such as Greece and Portugal, continue to exhibit the same issues that gave rise to EURUSD convulsions only a year ago. Euro interest rates are on a downward slope while, in the US, Quantitative Easing has peaked at the very least and is most probably on the way out. This is in spite of Fed efforts to control the effects this will have on volatility in treasuries and, by extension, volatility in currency exchange rates. Given all this EURUSD should be heading for parity, but it is not.

Why is that? As usual, you should not attempt to prescribe what should happen, rather you should use the fact that it is happening as further information on which to attempt to base trading decisions. In this case that translates into considering staying on the sidelines with regard to EURUSD, at least for the time being.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.