The euro is making gains against the US dollar today, and is also higher against most major peers including the British pound. Yesterday's ECB event contained few new surprises. As expected, ECB President Mario Draghi suggested that recent euro strength could harm the inflation outlook. Despite his cautious tone, traders bought the euro, helping the currency strengthen further. More significantly, Draghi criticized recent comments by US Treasury Secretary Mnuchin. Yesterday, Mnuchin sent the US dollar tumbling after he suggested that a weak dollar was good for exports. Draghi claimed that the comments threaten a global agreement to avoid directly targeting exchange rates. Looking at EUR/USD, the pair is currently trading just below the critical 1.25 level. Given the number of options and stops around 1.25, the currency pair is likely to be fairly volatile. Our short-term and medium-term outlook on the euro remains bullish.
EUR/USD is currently up and trading above 1.2450. The euro is up slightly against the yen, with EUR/JPY trading above 135.90. Finally, the euro is up against the pound, with EUR/GBP above 0.8760.
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. Composite Markit PMIs (58.6 vs. 57.9 expected) were ahead of expectations. German Gfk consumer confidence (54.4) and the IFO business survey (117.6) were both ahead of expectations. The ECB's press release and statement contained few new surprises. 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.