The euro is mostly flat today. Looking at the euro against major global peers, the currency is selling off against the yen while trading sideways against the pound. On the other hand, the euro is strengthening against commodity currencies such as the Canadian dollar and the Australian dollar. After the ongoing stock market rout appeared to come to an end yesterday, the euro strengthened against the US dollar. The S&P 500 rebounded by 1.75% yesterday. Later in the day, EUR/USD gave up some of its gains as the performance of stock markets in Asia has been decidedly weaker. The euro tends to weaken during global downturns. The US dollar and the yen function as safe havens, and strengthen during downturns. This explains why the euro has been particularly weak against USD and JPY. Looking at German coalition news, talks went into the night yesterday. According to Reuters, the two sides are still trying to come to a final agreement. Our short-term and medium-term outlook on the euro remains bullish.
EUR/USD is currently flat and trading above 1.2380. The euro is down against the yen, with EUR/JPY trading above 135.20. Finally, the euro is flat against the pound, with EUR/GBP above 0.8870.
Looking at economic data from the Eurozone this week, we’ll see PMI surveys as well as data from the German manufacturing and export sector. Eurozone Markit services (57.3) and composite PMIs (59) were ahead of expectations. Retail sales (1.9%) were ahead of expectations while the sentix investor confidence (31.9 vs. 33 expected) was slightly below estimates. German factory orders beat expectations by a very significant margin (7.2% vs. 3.1% expected). Later today, we’ll see German industrial production. There is also a non-monetary policy-related ECB meeting scheduled today. On Thursday, we’ll see German trade balances. Last week, Eurozone Markit manufacturing PMIs signaled strong future growth.
As the euro strengthens, we are upgrading the currency to bullish in the short-term. Looking at various technical indicators, the currency is trading within normal conditions. 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 trading within normal conditions. Our analysis is based on various technical indicators when looking at a weekly chart.