The euro is mostly higher today, and especially against the US dollar. The currency is flat against the British pound, while selling off against the Japanese yen. Optimism for the Eurozone continues to grow thanks to strong economic data. Yesterday, the ZEW survey for economic sentiment was higher than expected both for Germany and the broader Eurozone. Eurozone consumer confidence also came in much higher than expected. In response to the figures, the euro strengthened. While the upcoming European Central Bank meeting (tomorrow) poses a risk to the ongoing rally, traders are betting that the ECB will end its asset buying program later this year. While ECB officials have directly commented on the risks to inflation due to a stronger euro, this has had a limited impact on the rally so far. Our short-term and medium-term outlook on the currency remains bullish.
EUR/USD is currently up and trading above 1.230. The euro is down against the yen, with EUR/JPY trading above 135.40. Finally, the euro is flat against the pound, with EUR/GBP above 0.8770.
Looking at Eurozone economic data and events, markets will be watching this week's ECB meeting and PMIs. The German ZEW economic sentiment survey (20.4 vs. 17.8 expected) and Eurozone consumer confidence (1.3 vs. 0.6 expected) were higher than expected. Later today, we'll see Markit PMIs (manufacturing, services, composite). On Thursday, we'll see German Gfk consumer confidence and the IFO business survey. More importantly, traders will be paying close attention to the ECB's press release and statement. No changes in monetary policy are expected. Last week, Eurozone inflation figures met expectations.
As the euro strengthens, we are upgrading the currency to bullish in the short-term. Looking at various technical indicators, the currency is looking overbought. This is based on a daily chart of the euro currency index.
As the euro continues to strengthen, 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.