Global Macro Commentary

The big question for the euro right now is whether it is bottoming or continuing its downtrend. But first, here’s a quick look at euro fundamentals: (1) weakening economic data; (2) rising inflation; (3) softening ECB hawks; and (4) dropping/bottoming crude prices. Although crude seems to be putting in a bottom, weak economic data and rate cut expectations seem to be supporting the euro bears. Looking at the chart below, there is a clear downtrend. The euro rallied overnight to the upper range, but the bears took control after positive US GDP data came out, pushing the euro below the short-term rising wedge. The dollar index, however, looks pretty toppy right now, and it will be interesting to see how the euro moves once key European economic data (unemployment, CPI, various confidence indicators) come out early tomorrow morning. I flipped from euro long to short.

Euro: target=1.4550, stop=$1.4750