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Dollar Weakness or Euro Strength

Posted by WorldWideMarkets . on Oct 28, 2013 2:07:00 AM

The euro strength is almost something of an afterthought given the focus on the U.S. dollar but it can’t be overlooked. The question is if it is euro strength or dollar weakness that is driving the single currency higher. The short answer is probably a little of both.

The dollar as we know has yet to find a floor given the shocks of the Fed failing to taper stimulus and the reverberations of the government shut down and the debt ceiling debacle which only resulted in a temporary Congressional solution at the 11th hour. The larger consequence was a huge swing in sentiment against the dollar compared with the first eight months of the year as seen from the swing back to some sort of stability in emerging markets. 

But the other side is that the euro does have some fundamental support. French, German, and broad EZ PMI data for this month was disappointing but did show signs of growth at a slow pace. While that news in the U.S. may have rattled investors further, in the euro zone it seems to stoke relief if not downright optimism that the euro zone is not going to have another recession.

Watch for a little weakness in the euro, or at least a struggle, given it has been overbought using the 14-day exponential relative strength index since October 17, but for now it has momentum. The single currency was last at US$1.3802 and is up around 4.7 percent to date with almost all that gain coming in the last three months.euro trading


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