After falling sharply yesterday (particularly against safe haven currencies such as the US dollar and the Japanese yen), the euro is mostly flat today. The euro fell yesterday thanks to many factors. The common currency was weighed down by the ongoing stock market rout, tumbling crude oil prices (which sent USD higher) and comments from European Central Bank officials. Unlike safe haven currencies, the euro tends to weaken when global risk appetite falls. Turning to the ECB, council member Ewald Nowotny commented that "the U.S. Treasury purposely pushes down the dollar and wants to keep it low" (translated from German) in an interview with Wiener Zeitung. Looking at reactions in foreign exchange markets, EUR/USD fell shortly after the interview went public. Looking at political news, German coalition talks have ended after the SPD and the CDU/CSU came to an agreement. Merkel's party made many concessions in order to strike a deal. According to Reuters, this includes a larger commitment to the Eurozone and an SPD party member taking the helm of Germany's finance ministry. Our short-term and medium-term outlook on the euro remains bullish.
EUR/USD is currently flat and trading above 1.2270. The euro is up against the yen, with EUR/JPY trading above 134.580. Finally, the euro is flat against the pound, with EUR/GBP above 0.8820.
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). German industrial production figures were strong but missed expectations (6.5% vs. 6.8% expected). Later today, 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.