The price action from this morning’s European trading session suggests market players are expecting the Federal Reserve to enact another round of quantitative easing as the USD traded lower despite bearish economic data from the euro zone.
European data was significantly weaker this morning but it did not deter traders from bidding the EUR higher. The German Ifo Business Climate fell to 108.7 from 112.9 on expectations of 111.2. The euro zone industrial orders also fell sharply by 0.7& on consensus forecasts of a 0.6% increase. The data comes on the heels of yesterday’s PMI data that was higher than forecasted but still signaled a weaker Q3 euro zone growth.
Interesting price action was seen in the EUR/USD this morning. Despite the negative data releases the euro was bid for a healthy 100 pips following the news and the pair rose to a high of 1.4470. This signals something other than today’s euro zone data releases are driving the forex trading markets. One could speculate that market players are expecting the dollar to be weaker after Friday’s Fed speech in Jackson Hole. As readers of this forex trading blog will be aware of, the risks for Bernanke to disappoint traders are high. EUR/USD near-term gains have been capped at 1.4500 while support is found at 1.4350.
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