The euro is again flat today, and remains in oversold territory. Given that Eurozone bond yields have been selling off for the past few days, the euro has received a limited amount of support from interest rates. Looking at news, Reuters is reporting that German economic advisers have warned against the ECB's expansionist monetary policy. Specifically, they have said that the Bank's policies risk financial stability and could create volatility. In addition, they are forecasting that German economic growth is heading into a "boom phase". Specifically, growth is set to accelerate to 2% this year and 2.2% next year. As we said yesterday, while we aren't bullish on the euro over the long-term, the common currency looks due for a short-term rebound.
The EUR/USD exchange rate is now trading above 1.1610. Looking at EUR/JPY, the pair is again flat today and is currently trading just above 131.90. The euro is up against the pound, with EUR/GBP now trading above 0.8830.
This week’s Eurozone economic calendar includes a fair amount of survey data and trade balance figures. On Monday, Eurozone Markit Composite PMIs beat expectations (56 vs 55.9 expected). Eurozone producer prices were also above expectations (2.9% vs. 2.8% expected). German industrial production missed expectations (3.6% vs. 4.4% expected) while Eurozone retail sales (3.7% vs. 2.7% expected) beat expectations. On Thursday, we’ll see German trade balances. Last week, GDP growth figures exceeded expectations while inflation came in below estimates.
As the euro rebounds from oversold conditions, we are upgrading the currency to neutral in the short-term. Looking at various technical indicators, the currency was looking oversold earlier but is now 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.