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Thursday, May 24, 2007

Euro Outlook (23rd May 2007)

EUR/USD has nearly completed the retracement of the early European sell-off from 1.3463 to 1.3416. The Euro may have to thank its European neighbor, the Pound, for the support it lent the single currency intraday but sentiment towards the pair remains negative while spot trades below 1.3475.

Offers into the 1.3460's are in focus as NY traders return to their desks while option dealers note expiries at 1.3500 at the NY cut at 14:00 GMT. Looking ahead, US data is sparse in North American trading with weekly mortgage data already in circulation. At 13:30 GMT, the Fed Board of Governors meet in Washington to hold an open meeting on "open-end credit". Following this, more Kroszner comments are set to air around 17:00 GMT.

However, in the wake of the intraday chop it will be flows that determine the EUR/USD directional bias for the near-term. More offers are seen above into 1.3470/75 and 1.3480/85, with stops touted tight above the latter level. Should these be triggered then a run at 1.3500 will be looked for by bulls before some look to exit more speculative long positions.

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