The euro is mostly higher today. The common currency is gaining against the US dollar and the Canadian dollar, while trading sideways against the British pound and the Japanese yen. Looking at EUR/USD, the pair is re-testing highs last achieved earlier in the week. While several senior European Central Bank officials have commented directly on the strength of the currency and the issue of low inflation, the euro continues to strengthen. The US dollar continues to weaken without any end in sight, while markets are betting on the ECB ending its asset buying program later this year. As such, the euro bull market looks set to continue. In our weekly commentary on the Commitments of Traders report, we have warned that the euro looks due for a short-term pull back, given the large size of long euro positions on futures & options markets. Our short-term and medium-term outlook on the currency remains bullish.
EUR/USD is currently up and trading above 1.2260. The euro is flat against the yen, with EUR/JPY trading above 135.90. Finally, the euro is flat against the pound, with EUR/GBP above 0.8810.
Looking at Eurozone economic data and events, markets will be watching upcoming inflation figures. Eurozone trade balances were ahead of estimates (€22.5b vs €22.4b expected). German wholesale price index (-0.3% vs. +0.3% expected) were below estimates while consumer price index figures (1.6%) met expectations. Core (1.1%) and headline consumer price index (1.4%) figures from the Eurozone met expectations. Later today, we'll see German producer prices. Last week, Eurozone economic sentiment and German industrial production growth was at multi-year highs.
As the euro strengthens thanks to the strong outlook for its economy, we are upgrading the currency to bullish in the short-term. Looking at various technical indicators, the currency is currently trading within a normal range. This is based on a daily chart of the euro currency index.
As monetary policy expectations and economic growth power the euro, we are upgrading the outlook to bullish in the medium-term. Note that the euro is currently looking overbought. Our analysis is based on various technical indicators when looking at a weekly chart.