Long-term trend suggests additional euro strength

Further upside recovery for the single currency cannot be ruled out, since the bounce from the 1.3300 level in the aftermath of the ECB rate cut has been strong.

With EUR/USD now back above the 1.35 level and testing the 50-day moving average, a move through the 1.3540/50 levels would help cement its comeback. Downside support comes from the 1.3415/20 metric.

Overall, the longer-term trend from the June 2012 lows puts the bias on a stronger euro. Given the amount of interest in the German current account surplus lately, the narrowing and failure to meet expectations in the composite euro area current account surplus indicates that net direct investment continues to post outflows. The euro area current account surplus declined to a seasonally adjusted €13.7 billion in September, from €17.9 billion in August.

The US has to some extent been pinning its recovery hopes on resurgence in housing demand, and data from the US today includes the NAHB housing market index. This is a sector that has been coming off the boil recently: existing home sales in September were lower than expected. An increase to 56 is expected today, however.

Spot FX EUR/USD chart

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.

Find articles by analysts

Find out more about