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Video: Keeping Track of Deeper Fundamental Currents for the Euro

Video: Keeping Track of Deeper Fundamental Currents for the Euro

2016-05-30 23:35:00
John Kicklighter, Chief Strategist
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Talking Points:

  • EUR/USD has tracked out a broad range - forgoing remarkable bearish interest - since January 2015
  • While it may be a long-time off, speculation in advance of a change in ECB policy may start well ahead as with USD
  • In the event of a systemic risk aversion wave in the market, few currencies are as at-risk as the Euro

See how retail traders are positioning in the majors using the FXCM SSI readings on DailyFX's sentiment page.

It may be difficult to envision for one of the most battered fundamental currencies among the majors over the past years, but eventually the Euro will start to gain in anticipation of a monetary policy reversal. And, change in tide will almost certainly come well before an actual rate hike from the ECB. That same speculative and anticipatory viewpoint led the US Dollar to significant gains years before the Federal Reserve's December 2015 hike.

The market is a forward-looking entity, and speculative, first-mover status carries greater return potential than the slow income found in normal investment channels. This is just one major fundamental theme that can return the Euro back to its own fundamental influence.

Another, is the response to a resuscitated drive in risk trends. In full-scale risk aversion, the shared currency arguably stands to lose the most; and that can translate into significant capital outflow and currency depreciation. In today's Strategy Video, we discuss the major themes that could return the focus to the Euro for momentum as well as the tactical view that remains for pairs like EUR/USD, EUR/JPY and EUR/GBP until those tides rise again.

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