Friday, February 26th, 2010
EUR/USD Remains in Tight Range amid Uncertainty
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The EUR/USD currency pair continues to trade in a relatively tight range, as dealers wrap up the profitable short positions against the euro ahead of the weekend. While concerns about Greece and now Spain continue to pressure the euro, dollar bulls now fear that the Federal Reserve will keep rates low for an extended period of time. The result is a range-bound currency pair with an unclear long-term direction as both currencies are weakening simultaneously.
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The dollar trended slightly lower during today’s session after U.S. existing home sales fell 7.2% in January, which was lower than market expectations of a marginal 0.9% increase after December’s sharp 16.7% drop. Meanwhile, a slowdown in consumer confidence also led to pressure on the dollar. The Reuters/Michigan index fell to 73.6 from 74.4 in January, which compares to market expectations of a more modest decline to 74.
Despite the weakening consumer, businesses appear to be growing more and more optimistic. The Chicago Purchasing Managers Index released by Kingsbury International saw its fifth consecutive monthly increase to 62.6 in February, versus expectations of a decline to 59 from January’s 61.5 score. Meanwhile, equities moved largely higher during the session after a rough start in the early morning hours.
On a technical level, the currency also has yet to breakout from an increasingly tight channel:
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-- Written by David Breen
