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Euro Finds Volatility Despite a Quiet European Session

Benjamin Spier

It’s on days like these that you can feel the increased trading volume that entered the Forex markets at the start of 2013. Despite a lack of significant economic releases or important chatter in the European session and a banking holiday in the United States, the British Pound set a new seven month low against the US Dollar, and EUR/USD saw significant volatility above the week’s open.

Some recent doubts have been raised over France’s ability to reach the target 3% deficit. French European Affairs Minister Cazeneuve said earlier in the session that France has not abandoned the deficit target and the country will not deviate from reducing debt.

Also in Europe, one of the Bundesbank representatives in the ECB, Andreas Dombert, said that banks shouldn’t rely on the low interest rates, because the low rates may exaggerate asset purchases. The hawkish comments had no significant effect on Euro trading.

Euro saw a 40 point spike a bit after the release of Spain’s bad bank loans. The bad loans ratio was at 10.44% in December, slightly better than the bad loans ratio of 11.38% in November. EUR/USD rose to 1.3375, but soon erased most of those gains. However, it’s unclear if the spike in trading was related to the Spanish banks data. Resistance might now be seen by a previous resistance line around 1.3374, which coincides with a 50% retracement level. Support could continue to be provided around 1.3284.

In Japan, USD/JPY found its way back to 1.3400 as the G20 supported BoJ easing as long as it doesn’t explicitly aim at the Yen exchange rate. These comments were less aggressive than some traders had been expecting ahead of the G20 meeting.

Japan Chief Secretary Suga said today that the government will present BoJ nominees towards the end of the month. If a markedly aggressive dove is chosen as the new BoJ governor, it could further weaken the Yen against the US Dollar.

EURUSD Daily: February 18, 2013

Euro_Finds_Volatility_Despite_a_Quiet_European_Session_body_eurusd_daily_chart.png, Euro Finds Volatility Despite a Quiet European Session

Chart created by Benjamin Spier using Marketscope 2.0

--- Written by Benjamin Spier, DailyFX Research. Feedback can be sent to bbspier@fxcm.com .

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