Euro: Will We See Another Thanksgiving Week Breakout?

 Although Thanksgiving traditionally leads to quiet trading, we do not rule out a big move since the drop in volatility has often times fueled major breakouts in the currency market.  Last year for example, the EUR/USD broke out of a week long consolidation and rose 100 points the day before Thanksgiving.  On Thanksgiving Day there was no major price action but on the Friday following Thanksgiving, the EURUSD extended its gains by another 150 pips.  Based upon the EURUSD’s recent price action, the odds are certainly in favor of greater volatility this week. ECB President Trichet and member Liebscher were on the wires talking about growth and inflation risks. Both seem to agree that even though slower GDP growth is a possibility, in the medium term the risk to price stability is still to the upside.  German producer prices are due for release tomorrow and we expect growing inflationary pressures. Switzerland will be releasing their October trade balance numbers. Even though the Swiss franc has plummeted against the Euro this month, in October it actually sold off which is why we expect a stronger trade surplus.  USDCHF continued to weaken and is within 50 pips of its 1995 low.

Written By Kathy Lien, Chief Currency Strategist for DailyFx.com