EUR/USD creeps back up towards 1.3100

Having bounced off 1.2800, the EUR/USD pairing looks to be slowly making its way back up to the top end of the range.

Yesterday’s economic data for Europe was broadly better than expected; however the afternoon’s US ISM manufacturing figures were disappointing. Expected at 50.6 they came in at 49, a crucial difference taking it under the 50 level and reflecting a contraction in the US economy. However, this has today been taken as an encouraging piece of news, due to Federal Reserve chairman Ben Bernanke’s repeated comments in last week’s committee speech that it would be the US economic figures that would dictate when the quantitative easing process would end. 

Yesterday’s contracting figures show that the US economy is drifting further away from targets that need to be hit in order to ‘turn the taps off’, leaving markets to interpret bad news as good news as it will prolong the US stimulus of the equity markets. This will keep the treadmill of knock-on effects moving, also.

Looking at the chart below, the parameters that the currency cross has been trading between are well set out. Even with the threat of a change to the status quo, following last week’s grilling of Ben Bernanke and the increased expectation of a shift in stimulus policy, this well-established range has remained unbroken.

Spot FX EUR/USD chart

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