Why is the Euro Rallying?

The euro has come along way since the end of June when it was trading below 1.20. Here are a few reasons why the EUR/USD has rallied:

1. Investors are Growing Less Nervous about the PIIGS – Credit Default Spreads are narrowing

2. Weaker U.S. data has turned the market’s focus to problems in the U.S.

3. Strong dollar in Q2 puts the risk of weaker earnings reports – U.S. earnings season begins next week

4. Major Short Squeeze – IMM data shows that as of last Tuesday, there are still ALOT of short EUR/USD positions

5. Sufficient Demand for Spanish bonds

6. No Major Funding Disaster after the maturity of the ECB’s 1 year lending facility

7. ECB not expected to make any major announcements before Stress Test results

8. Market expects the ECB to announce stress test methodology

About Kathy Lien 235 Articles

Kathy Lien is an Internationally Published Author and Chief Strategist of DailyFX.com, one of the world’s most popular online websites for currency research. Her trading books include the highly acclaimed, Day Trading the Currency Market: Technical and Fundamental Strategies to Profit form Market Swings (2005, Wiley); High Probability Trading Setups for the Currency Market E-Book (2006, Investopedia); and Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game (2007, Wiley). As Chief Currency Strategist at FXCM, Kathy is responsible for providing research and analysis for DailyFX, the research arm of FXCM. She also co-edits the BK Forex Advisor, an Investopedia.com Premium Service with Boris Schlossberg – one of the few investment advisory letters focusing strictly on the 2 Trillion/day FX market.

Kathy is also one of the authors of Investopedia’s Forex Education section and has written for Tradingmarkets.com, the Asia Times Online, Stocks & Commodities Magazine, MarketWatch, ActiveTrader Magazine, Currency Trader, Futures Magazine and SFO. She is frequently quoted by Bloomberg, Reuters, the Wall street Journal, and the International Herald Tribune and has appeared on CNN, CNBC, CBS and Bloomberg Radio. She has also hosted trader chats on EliteTrader, eSignal and FXStreet, sharing her expertise in both technical and fundamental analysis.

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