The euro is stronger this morning, and is currently strengthening against all major currencies except the British pound. Looking at EUR/USD on a daily and weekly chart, the pair is once against looking overbought according to technical indicators. While this does not suggest an imminent reversal, the euro is more susceptible to profit taking at current levels. Looking at recent economic data, the figures show that Eurozone growth remains strong. Consumer confidence (1.3) for the region met estimates, while Q4 GDP (2.6% YoY) and services (16.7) / economic sentiment (114.7) were slightly below expectations. Later today, we'll see flash inflation figures as well as Eurozone unemployment. While the ECB has pointed out weak inflation as a barrier to raising interest rates, the central bank is running out of reasons to maintain its significant asset buying program. Looking at German coalition news, the SPD and CDU have achieved a breakthrough in their talks. Specifically, they have agreed to a monthly cap on refugee family reunions. Our short-term and medium-term outlook on the euro remains bullish.
EUR/USD is currently up and trading above 1.2440. The euro is up against the yen, with EUR/JPY trading above 135.10. Finally, the euro is flat against the pound, with EUR/GBP above 0.8760.
Looking at Eurozone economic data this week, markets will be watching GDP growth, inflation and retail sales figures. The German consumer price index (1.4% vs. 1.6% expected) was below consensus estimates. Eurozone Q4 GDP growth (2.6%), services sentiment (16.7), industrial confidence ( 8.8)and economic sentiment (114.7) were all slightly below consensus estimates. Consumer confidence (1.3) met estimates. Later today, we’ll see German retail sales and unemployment. We’ll also get Eurozone unemployment and the consumer price index. On Thursday we’ll see Eurozone Markit manufacturing PMIs. Finally on Friday, we’ll see Eurozone producer prices. Last week, German business sentiment rose to 11-year highs.
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.