Daily FX
Euro Breaks Out, Headed Towards All Time Highs
Friday September 7, 5:50 pm ET
By Kathy Lien, Chief Currency Strategist strategist@dailyfx.com


The Euro has finally broken out on the back of sharply weaker US economic data. Next week, we fully expect the EUR/USD to make a run towards its all time high of 1.3850, which is less than 100 pips away.

With the ECB likely to keep interest rates on hold for the remainder of the year, the EUR/USD will once again become the anti-dollar. This means that weak US data will drive the EUR/USD higher while strong US data will drive the currency pair lower. This has not been the case over the past few weeks because weak US data would lead to a flight to safety into US dollars and US treasuries. We have yet to see a material slowdown in Eurozone economic data and even though the central bank will probably not be able to raise interest rates again this year because of problems in the US, they still remain hawkish which is a sharp contrast to the Federal Reserves expected monetary policy bias. A number of ECB officials are scheduled to speak next week including Trichet. Even though there is a lot of economic data on the calendar, with the exception of Eurozone CPI, nearly all of these releases are Tier 2, or non-market moving.

Written by Kathy Lien, Chief Currency Strategist of DailyFX.com