Goldman's Jon Pierce asks why, and how much longer, will the EUR keep surging. He provides some answers, but not the real one, which is that the Fed's second round of monetization is now being actively priced in and just like last year, is resulting in a plunge in the dollar. Which incidentally means the end of Europe's export-led economic "miracle" - it was fun while it lasted. Surely US exports can take over from Europe... Of course it would be great if the US had stuff to export. Either way, Goldman has provided another downside stop target of 1.305 (a level we were at as long ago as last Friday). Somehow every time GS goes out and shares its stop limits, they imminently get hit. Although with the Fed now actively back to destroying the dollar, Goldman may just luck out for once.
Euro update - Can we climb further ?
The Euro continues to trade in good heart . The clearance and close above the Fibbonaci resistance level at 1.3125 is very encouraging. The news/data backdrop continues to be favourable with yesterday's strong European PMIs and somewhat weaker US ISM the latest data installment to highlight the contrasting picture . The tightening of peripheral spreads and strong risk performance have helped drive the move though it is harder to see this as an ongoing source of support . The past week has seen some significant medium to longer term shorts covered and I don’t think short covering can be a meaningful upwards driver going forward . But whilst the market has probably covered its short position I don’t think it has yet built any sort of meaningful long position and given the very positive backdrop there is plenty of room for fresh buying to reflect this . It certainly concerns me that we have bounced 11% from the 1.1876 low on 7th June but perhaps we need to view the recent upmove in the context of the bigger move lower from the 1.5145 high of November last year . It can be argued that the reasons for the large move down have largely been negated and we therefore still have plenty of room to retrace higher . I am sticking with a core long position ; looking to add should we dip to 1.3125 and rolling up a stop to 1.3050 (below the week's low) . Next resistance is at the March low of 1.3267 and the next main target is the 200DMA at 1.3568 .