New highs: The euro is sizzling, up 400 pips this week

I keep coming back to the euro chart today as it surges 164 pips to bring the week-to-date rally to four big figures.

There is a clear confluence of technicals and fundamentals in the past two days after Germany rolled out the fiscal bazooka. It’s an illustration of what can change when something that hated like the euro suddenly gets a positive catalyst.

There are still questions on whether the German political parties can pull it off but if they can’t do it now amidst the threat of Russia and the far right, then I don’t think it will ever happen. The great news for Germany and the euro is that it’s the one spot with ample fiscal space and this is an invitation to use it.

The other side of the trade is also interesting as tariff and Trump uncertainty thins out a crowded long trade in US dollars. That appears to be happening at the same time as the market begins to raise questions about AI progress and application. The US dollar is broadly lower again today and has been struggling in both risk-on and risk-off scenarios in the few weeks.

The trade so far this year has been to exit highly-valued US markets and shift into Europe, China and emerging markets.

This article was written by Adam Button at www.forexlive.com.