Breakout Inevitable - EUR/USD Consolidating
Will the Euro break out or break down? The current consolidation pattern of the EUR/USD provides only two options. A deciding factor for this directional thrust could hinge upon the coming French election next month.
By FXstreet:The EUR/USD is copying the pattern from previous days. Following a volatile European session, the bloc currency orbited around the 1.3300 figure on Wednesday, closing the day at 1.3315, 0.01% down on the day. In the last three sessions, the pair has been trading between 1.3265 and 1.3365, almost unchanged.
With the French voting stations open until 7pm, and the first exit polls due just after 8pm although the French media is authorized to report preliminary results (these are not exit polls, but numbers based on processed ballots) historically an accurate indicator, here is a simple matrix predicting how the Euro will respond once the results start trickling in, together with event probabilities, according Citi:
EURUSD (%) outcomes from French Election Round 1 (joint probability of outcome in parenthesis)
In six months, Goldman Sachs thinks the euro will reach parity with the US dollar. In currency markets, "parity" is when two currencies have the same value, or a 1:1 exchange rate. The euro has fallen considerably over the last year and is currently at around 1.05 to the dollar. The euro hasn't been at parity with the dollar since late 2002.
By Joe Gelet:The EUR/USD has surprised many with its run up to 1.3172, but it had a lot of help from the Fed with the announcement of a new round of QE3. We've been waiting for the EUR/USD to stop going up for an opportunity to sell -- is this it?
Photo by Jonathan Moore/Getty Images
Like a spring released from under pressure, the euro ripped higher overnight despite the ECB delivering a so-called policy "bazooka" at its March monetary policy meeting.
The catalyst for the sudden and sharp recoil in the euro came from ECB president Mario Draghi during his scheduled press conference after the initial rate decision was delivered.
Douglas Borthwick submits:We have noted the pace over the past 6 months of the EUR/USD, following its path higher and noting the speed at which the move has happened. The first move happened on the change in flexibility in China's Yuan. At this point in time the EUR/USD rallied from 1.1876 to 1.3334, a 12.3% move. The EUR/USD then dropped from 1.3334 to 1.2588, a 5.6% move. This corresponded to the bottom line of the second standard deviation of the mean slope of the move.