This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Coming U.S. Economic Data Could Push Euro Lower

NEW YORK ( TheStreet) -- There has been much debate over the past few months over the differing states of economic progress in the U.S. and the eurozone.

The U.S. is viewed as being in a gradual recovery, while the European region is seen as just now bottoming from its recessionary downtrend.

The fundamental differences have led many to project diverging policy outlooks for both economies. Many believe that the Federal Reserve is more likely to tighten its accommodative monetary policy sooner than the European Central Bank.

Based on the price action below, investors can gauge where the market is setting up to go in the near future.

The first chart is of CurrencyShares Euro Trust (FXE) over PowerShares DB US Dollar Index Bullish (UUP).

This pair has traded within a wide range over the past three months, essentially feeling out levels at both the highs and lows of the year. Although it is expected that the Fed will begin to tighten policy first, investors are still unsure about the exact date at which the Fed will change policy. Based on this uncertainty, both the dollar and euro have received heavy inflows and outflows.

The euro is currently trading at its multimonth highs and has run into strong resistance levels. It's already August, and many believe the Fed will begin tapering in September, so the euro could pull back over the next few weeks.

Look for further strength in U.S. economic data to push the euro lower, because strong data will give investors more conviction about a September tightening.

The next chart is of SPDR S&P 500 (SPY) over iShares S&P Europe 350 Index (IEV). As the euro has strengthened relative to the dollar, so have European equities outperformed U.S. indices.

European large-caps have received a strong bid vs. U.S. equities as European economic data have been relatively strong and uncertainty over the future value of the dollar has pushed U.S. equities into a consolidation pattern.

This pair looks to be reaching levels of support, but it is unclear whether the pair will continue to trend lower or whether potential volatility could prompt investors to push more of their funds into the U.S. market, which is perceived to be a safe haven.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
FXE $110.12 0.00%
IEV $45.29 0.00%
SPY $210.66 0.00%
UUP $25.20 0.00%
AAPL $128.46 0.00%

Markets

DOW 18,132.70 -81.72 -0.45%
S&P 500 2,104.50 -6.24 -0.30%
NASDAQ 4,963.5270 -24.3630 -0.49%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs