The Euro is trading at a very important contention point against the US dollar. It is struggling to make a new all-time high which suggests that there are a lot of option barriers at 1.40.
This means there are just as many traders preventing a break as there are ones hoping for one. Given the continued deterioration in US fundamentals and the stability of Eurozone economic data, we still believe that a break of 1.40 is inevitable. US Federal Reserve Chairman Ben Bernanke and ECB President are scheduled to speak tomorrow. Unexpected comments by either of these central bank heads could trigger a sharp rally higher. German producer prices were the only piece of meaningful economic data on the Eurozone calendar this morning and that was right in line with expectations. There is no Eurozone data due for release, but there are quite a number of Swiss data. We are expecting the Swiss trade balance, producer prices, and the ZEW survey. All of these numbers are expected to be softer despite the hawkishness of the Swiss National Bank last week.
Written by Kathy Lien, Chief Currency Strategist of DailyFX.com