Sforex

EURUSD next week: The Volatility comes back ( PART 1)

FX:EURUSD   Euro Fx/U.S. Dollar
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---This article I mainly discuss Fundamental—
Last two weeks are very quiet, low volatility and liquidity make all traders feel so bored. I even couldn’t win any position because most currency pairs hold in a tight range and there is no signal of big change. EURUSD             , USDCAD             , USDCHF             , and GBPUSD             fluctuate in a range of 60 pips. The best perform last week is AUDUSD: Aussie lost 0.6% its value versus the greenback because of negative CPI             + bad China PMI. Everything would change this week, with a lot of economic data from US, EU, UK, and Japan, the volatility will come back and attract more traders enter the FX market.
Actually, with a lot of economic data are released this week, Technical Analysis has no meaning because market participants mainly eye on the data, any support and resistance levels could be broken any time, so I almost ignore TA this week and concentrate analyze fundamental.
Before going to detail, I recap what happen last week.
Once again E/U ignores all US economic data, and very sensitive with EZ data. It favours EZ data and seem show emotionless toward US even Mario Draghi speech. I indeed sympathize Mario Draghi; this is not the first time he tries to bring down E/U; clearly he dislikes the current level of E/U, and market sets the barrier for E/U: no matter what it moves, 1.40 level must be hold. The reason why E/U is still very high is current account surplus: capital inflows regularly into Eurozone, and there is no signal of stop. Hence, the more good performance of EZ economy, the more capital inflows this region. That why E/U shows very sensitive with EZ economic data. But why does E/U reject US data?. Simply, US is not a country of current account surplus, US is always in deficit state, so we couldn’t use current account to explain why E/U ignores US data. There is one financial asset of US attracting investors from around the world to buy: T-Bond             . Last month, I didn’t see any clue of improvement of 10 year T-Bond: severe weather and low inflation didn’t encourage investors holding USdollar             to buy T-Bond             . We need the improvement of 10-year T-Bond             to balance the current account surplus of EZ, and good US economic data would drive E/U lower.

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