Risk Seeking Investors Providing Buying Power for EUR USD Surge

The EUR USD traded higher throughout the day driven by increased appetite for risk. Global equity markets also traded better which led investors to seek higher yields in more risky currencies like the Euro.

The EUR USD traded higher throughout the day driven by increased appetite for risk. Global equity markets also traded better which led investors to seek higher yields in more risky currencies like the Euro.

Stock futures markets led by the S&P 500 Index were sharply higher boosted by strong earnings from Intel Corp. and Goldman Sachs. The recent data releases and earnings reports out of the U.S. have been buoying equity markets while putting pressure on both the U.S. Dollar and lower yielding Japanese Yen versus the Euro.

Despite being nervous over earnings results from other leading U.S. banks later this week, risk seeking investors are providing the buying power which is supporting the current rally. This surge to the upside is flying in the face of investors who are still approaching the financial markets with caution. Many investors are still far from convinced that the Euro Zone and U.S. economies are on a steady path to recovery from the deep recession that has been gripping both economies.

While the West struggles to right the ship, China is on track to reach its annual goal of 8% growth. The European Central Bank on the other hand is still debating whether the stimulus packages introduced several months ago are working or have to be expanded. This debate by ECB authorities is one of the reasons for the sideways trade this currency has seen over the past sixty days.

Demand for more risk is definitely the driving force behind the Euro strength this week as the economic data picture has been mixed at best. Earlier this week the ZEW indicator of confidence in the German economy was well below expectations. European consumer prices also fell for the first time in June led by declines in energy costs. Rising unemployment also helped contribute to a cut in household spending.

The Euro Zone economic reports do not suggest the need to buy the Euro at this time, but given the relatively higher yield versus the U.S. and Japan, investors are leaning toward the better yield in exchange for the extra risk.

Continue to look for more upside in the EUR USD especially if no stopper shows up over 1.4200. This appears to the next acceleration point on the charts.

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

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