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Euro Is Trading Unusually Flat: Is a Breakout in the Cards?

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Jul. 13 2016, Updated 8:48 a.m. ET

Euro remains flat, while pound rises by over 2%

The euro-US dollar currency pair has been trading on a flat note since July 6, 2012. It continued the flat trajectory on July 12. Relative stability in the euro has been partially attributed to the upcoming monetary policy releases, especially the Bank of England’s release on July 14. It could have a major bearing on the European Central Bank’s policies. Markets will look for direction from the Bank of England’s meeting. Anything more than a 0.25% cut by the Bank of England could see a massive correction in the euro because it would force the European Central Bank to act.

The pound was the strongest among European currencies with the political stability reflecting on the currency pair. It rose by 2.1% on July 12.

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Japan yen fell, commodity currencies gain

Major Asian currencies were trading stronger against the US dollar on July 12, 2016. The exception was the safe-haven currency Japanese yen. It lost favor among investors as markets started to stabilize and increased the risk appetite. The US dollar-Japanese yen currency pair is inversely related to the Japanese yen—it rose by 1.9%. To learn more about the yen’s safe-haven behavior, read Japanese Yen: The Safe-Haven Currency for Decades.

Commodity-related currencies such as the Australian dollar and New Zealand dollar were among the major gainers. They rose by 0.94% and 0.97%, respectively.

Impact on the currency ETFs

Looking at the performance of the currency ETFs, the US dollar–based ETFs were on a negative bias. The WisdomTree Bloomberg US Dollar Bullish ETF (USDU) and the PowerShares DB US Dollar Bullish ETF (UUP) fell by 0.23% and 0.08%, respectively. The Guggenheim CurrencyShares Canadian Dollar ETF (FXC) posted strong gains of 0.68%.

The Guggenheim CurrencyShares Japanese Yen ETF (FXY) had a sharp fall of 2.0% on July 12. The Guggenheim CurrencyShares Euro ETF (FXE) was trading flat.

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