Euro bulls enjoying the moment (Barcelona) - Again, the single currency is surprising the FX community, climbing to fresh highs in the vicinity of 1.2870, buoyed by a renewed wave of risk appetite stemmed from the Chinese manufacturing HSBC PMI print early this morning. The results indicated the economy may be returning to expansionary territory after a year, prompting investors to seriously start to consider a ‘soft landing’ in its economy.

Moving West to Europe, a batch of preliminary PMI prints in the core members of the bloc and the euro zone composite have followed suit bettering both expectations and previous month’s readings, although the reality is substantially different. Both the manufacturing and services sectors still remain below the 50 threshold, indicative of contraction, and there is nothing in the near or medium term horizon that can curb that trend. The fourth quarter figures thus look pretty somber, however the single currency continues to ignore the warning lights, driving the EUR/USD to higher ground after rapidly leaving behind the key 200-day moving average around 1.2830, and focus its attention on 1.2880 instead.
It is worth noting as well that both today’s holiday in the US markets and the reduced activity on Friday would magnify otherwise small movements in the cross, something that market participants should bear in mind.

… A mere rebound?

This last quick and steep appreciation of the euro against its American counterpart encourages traders to think twice when comes to predict the next steps of the cross. The well-known market scheme called the “dead-cat-bounce” is already in the investors’ mind. On the other side, the market participants have forgotten quite easily about the last EU fiasco over the past weekend, shifting their hopes now to a new meeting to be held on Monday, where the technicalities that have prevented Greece from obtaining the next tranche of aid worth up to €44 billion would be dealt with. Of course, a success is far from guaranteed. What’s more surprising, euro traders seem to ignore the EU Leaders Summit in Brussels, kicking off today in the European evening, with the main agenda focused on the bloc’s budgetary figures for the 2014-2020 period. A task everything but simple.

Technically speaking, the research team at assesses that the Bullish Percentage Index (BPI) is continuing its way up and getting closer to the upper threshold at 70% (overbought territory), showing at the moment that 68.42% of the euro-based pairs are in bullish mode, on a point and figure pattern.

… Friday docket

Against the backdrop of the second day of the EU Summit, Germany will post its Q3 GDP figures, expected to ease a hair to +0.2% QoQ, followed by a measure of French Business Climate ahead of the relevant German IFO series. Italian Retail Sales will follow, closing the week in the data front.