Video: Why is EURUSD Rising When the Fundamentals Seem So Bearish?
• The Fed is arguably the most hawkish major central bank and the ECB the most dovish
• Greece is a lingering threat to the Euro's health while the Dollar stands ready to play haven to fear
• A rebound can develop without conviction as a prevailing trend see some capitulation
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Interest rate views between the Euro and Dollar couldn't be much different and Greece is a persistent threat. So then why has EURUSD regained ground? There is no doubt that some speculators with a higher threshold for risk are taking jumping on in anticipation/hopes of an unlikely development - like US interest rate forecast collapsing or Greece's crisis finding a swift resolution. Yet, that view is a serious minority of the market; so it will struggle for conviction and thereby follow through. In the absence of new, added interest however we do have the influence of short traders taking trades off. The short-term outcome looks to be the same but the potential is very different. We sometimes just label this a 'pullback' or 'capitulation', but there are mechanics to this view that can help our trading. We discuss this - using the EURUSD as our primary example - in today's Strategy Video.
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.