Euro: Be Careful of What You Buy

Depending on which currency pairs you traded today, you could have made money being long Euros.

On Friday, we had said that the better buy this week may be relative strength plays like EURGBP or EURCAD than the EURUSD itself because of the risk of stronger US data. Interestingly enough EURGBP and EURCAD were two of the few currency pairs that are actually up on the day. In an environment where we have a potential for a dollar rally, the dollar’s biggest gains would be against the currency pairs whose rise have been driven mostly by speculation and flow rather than economic data. This is the case with the British pound which reported only downside surprises last week and the Canadian dollar, which has rallying on the belief that oil will reach $100 a barrel. Although this trend could continue, tomorrow we should have some Euro driven movements with German GDP, the ZEW survey and Industrial Production due for release.

[B]Written By Kathy Lien, Chief Currency Strategist for DailyFx.com[/B]