Global stocks are little changed to slightly higher after the US S&P/Case Shiller home price index rose in July for the third time in a row, while consumer confidence improved more than expected in September.
Euro recovers from below 1.2900, choppy action expected
EUR/USD failed to make a clean break of the 1.2900 support level and bounced, erasing intraday losses into the New York opening. EUR/USD was last trading at the 1.2960 area, 0.2% up on the day, having hit a low of 1.2885 and a high of 1.2967.
The euro steadily retreated from the 1.3170 area where its rally lost momentum last week, although the setback has been contained by the 1.2880 zone so far. It seems to be a growing consensus among analysts on that EUR/USD price action has been merely consolidative this week, although they remain split on the shared-currency fate in a longer-term view.
"The EUR has made marginal new lows overnight, but like the rest of the FX majors the move hasn't been anything more than consolidation", says the TD Securities team. "Unpredictable headlines are still the biggest EUR-driver at the moment, which typically makes for choppy price action, but with the medium term trend is still bearish, we still prefer selling rallies in the short term here". TD Securities also notes that Core Eurozone-US 2-year spreads have not matched EUR/USD's impressive rise over the past two months, "and are still more consistent with a EUR level below 1.25".
Meanwhile, Wells Fargo says that: "the euro could potentially be in something of a holding pattern until we get the next significant development – either positive or negative – on the Spanish front, meaning we have a broadly neutral view on the euro and other foreign currencies for the coming days".
John J Hardy, Head of FX Strategy at Saxo Bank, thinks that EUR/USD only gets a psychological boost if we see 1.3000+ again. "This week would be about trying to carve out a range and deciding when or whether the post QE-bonanza consolidation stronger in the USD and JPY is over with", the analyst says. "Signs are out there that some investors are putting on 'follow on' positions today, but again, 1.3000 is a more important pivot zone than what we saw today".