The Euro has shown some strength early on Friday, but the weekend will bring the results of a meeting between Iranians and Americans that could throw the markets into disarray on Monday.
EUR/USD
The Euro has rallied a bit during the trading session on Friday as traders are waiting to see what the result is going to be of the talks between the Americans and the Iranians in Pakistan over the weekend. This will have a major part to play in how the interest rate markets move and that of course will have a major part to play in how the Euro moves against the US dollar.
We are currently looking at the 10-year yield being above the 4.30 level, which for me is a bit of a line in the sand and that could spell some trouble for the Euro but quite frankly this is going to be headline driven. Whatever is decided over the weekend in Pakistan will be the main driver of what happens on Monday.
A Market Driven by Risk Appetite
If it looks like peace is going to be a real thing then there is a significant chance that the Euro continues higher. If it looks like there is no real progress made, then I suspect the Euro falls. I really think it is simple at the moment because it is all about risk appetite and what that is going to look like for the next several days.
The 1.18 level is a major inflection point on the chart, and I think that is probably your next target, but we will just have to wait and see how that plays out. Again, it is a little unfortunate in the sense that we are literally going to have to sit here and wait to see what a meeting brings in Pakistan but that is literally where the markets are right now. If it is good news and US 10-year yields start dropping that is very good for the Euro and of course vice versa.