Euro flat ahead of Sunday's German elections

September 20, 2013

The European session was relatively calm, as there were no major headlines and no key economic data releases. Most major G10 currencies have been consolidating going in to the weekend.

Euro was little changed against the dollar and is overbought although remains bullish. Key risk will be this weekend’s election in Germany, which is Europe’s largest economy. Meanwhile, Euro zone consumer confidence data are due later today, also important.

EURUSD was flat in the European session, trading around $1.3520.

The pressure on the dollar has eased since the Fed announcement on Wednesday not to taper. The greenback has retraced the post-Fed dip against the yen and the upside remains. Speeches by Federal Reserve policy makers today will be key risk to the dollar. St. Louis Fed President Bullard will be closely watched as he is due to speak in New York at around 1pm EST.

USDJPY has been range bound since the rally on Thursday after strong US data. The pair opened in Europe at 99.30 , supported at 99.20 and traded highs of 99.46. Going into the US session, the pair was moving higher. By mid-US session trading, the dollar may become volatile as Fed’s Bullard speaks. 

The long-term outlook for this pair is to the upside since diverging monetary policies of the Fed and Bank of Japan will favour the dollar.

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