Independant Analyst: Lena Manousarides 14th October

publication date: Oct 14, 2008

Euro Bulls Are in Control For Now…More Gains to Come?

The week has started with risk appetite all across the board and euro breaking higher by the minute. The fact that markets calmed after the “black” Friday is something that needs attention, however we are not yet convinced that the crisis is behind us!
EUR/USD holds 1.36 for now and a clear break of 1.3780 will give the pair more ground for further gains towards 1.3880 which is 38.2% retracement from 1.48 all the way down to 1.32. It is clear that euro bulls are back in control for now and only a break of 1.3580-1.36 will negate that.
Today the economic calendar has a few releases, with CPI out of UK printing higher numbers and therefore helping sterling strengthen and German ZEW which came once again negative but didn’t seem to dent Euros strength. Let’s not forget that DOW JONES and NIKEI yesterday printed an impressive correction and that helped carry trades correcting with EUR/JPY breaking 140 and helping euro move even higher against the greenback.
Later on today we have a speech by Bernanke and Paulson, the “dynamic duo” which along with other FED officials will speak about the current crisis and their plans to restore confidence back in the Banking system. Market participants will monitor their words closely and they will decide if the recent rally in global markets will continue further.
At times like this, traders are in a difficult position to judge the current situation and unless they see a dramatic change in already negative sentiment, the uncertainty and fear will still remain in the sidelines.
GBP/USD is also trading higher and the daily charts show that there is more room for gains towards 1.77. What did it for the pound was Browns brilliant rescue plan which gave investors some kind of reassurance that maybe UK economy will survive the recent crisis and maybe manage to stabilize in the coming months?
The question now that arises for all of us is: have we actually seen a bottom in the markets from the recent fall? Or is there more weakness to come? Well, that will be answered in the coming days as the current correction we experience might just be that: a correction before further losses. Don’t forget that sentiment is everything in times of crisis and until that is restored everything is possible.
Let’s see what Bernanke says about the economy and how traders react after New York open. Also, it will be interesting to hear Bank of Japans president Shirakawa when he delivers a speech about the monetary policy and what the bank thinks the next move shall be…