also pulled back sharply on Friday and some traders may find it interesting that the decline on a percentage basis was greater than sterling and the Australian dollar
even though fundamentals in those countries are less positive but the explanation is simple. Many of the other currencies lost momentum earlier this month and the euro
is finally catching up. At the end of the day we expect the euro
to outperform up until the point where the ECB begins to talk it down. Unlike other countries there’s been more positive than negative data and the central bank
is widely expected to upgrade their economic forecasts next month and could begin tapering asset purchases. The latest economic reports show German factory orders rising strongly but retail demand is slowing according to the PMIs. While we are bullish
euros, the currency is up 10% this year and that will eventually catch up to the economy. We have already seen some areas of weakness and suspect that next month’s economic reports may not be as good as the last one. Either way, for the time being until there is data weakness, the euro
should outperform other currencies. Germany’s industrial production and trade balance are due for release next week – these reports are not expected to have a significant impact on the currency.
The next big focus will be ECB President Draghi’s speech at Jackson Hole later this month. EUR/USD
has support between 1.1630 and 1.1670. The Swiss Franc
extended its losses this week, driving EUR/CHF
above 1.15. Outside of profit taking there is very fundamental or technical reason for the pair’s trend to change.