After a very poor week, the euro is enjoying a small rebound. This is especially the case against the US dollar. The euro remains either flat or weak against the British pound and the yen. Despite an escalation in Catalonia over the weekend (Madrid has now dissolved the local government as per Article 155 of the constitution), this has had a limited impact on the euro so far. Instead, markets will be focusing on preliminary Q3 GDP and inflation numbers set to be released tomorrow. Eurozone growth figures have been strong in recent times, and forward-looking indicators (such as surveys) suggest that this trend is set to continue.
The EUR/USD exchange rate is now below 1.17 and is trading close to 1.1610. Looking at EUR/JPY, the pair is currently trading just above 132.0. The euro is also down against the pound, with EUR/GBP now trading below 0.8850.
This is a fairly critical week for the Eurozone, with lots of important data on the weekly schedule. On Monday, we’ll see German retail sales, Eurozone industrial confidence and sentiment figures. On Tuesday, we’ll get Eurozone Q3 GDP numbers, inflation and French unemployment rates. Finally on Thursday, we’ll see German unemployment and German Markit manufacturing PMI. Last week, The ECB failed to meet the market's tapering expectations, choosing instead to reduce the scope of the existing program without defining a clear end date.
Following the ECB meeting, we are downgrading the euro to bearish in the short-term. Looking at various technical indicators, the currency is neither oversold nor overbought and is trading within normal conditions.
Following the ECB meeting, our medium-term outlook on the euro is back to bearish. While the currency looked overbought in mid-October, this is no longer the case today and the euro is trading within normal ranges. This is based on various technical indicators when looking at a weekly chart.