The euro is currently selling off against the US dollar and the Japanese yen. The common currency is slightly higher against the Australian dollar and the Canadian dollar, while trading sideways against the British pound. Yesterday, the euro weakened following worse-than-expected economic data including German factory orders and Eurozone investor sentiment.
As more and more data points to an increasingly obvious slowdown in the Eurozone this year, the euro is coming under pressure. Following last year's rally, speculators have amassed big long positions in euro futures and options contracts. As described in last week's take of the Commitments of Traders Report, the unwinding of these positions is exacerbating the sell-off in the currency. While the European Central Bank's Chief Economist Peter Praet said that there is "no evidence that the moderation in the pace of economic expansion reflects a durable softening in demand" in a speech in Geneva yesterday, recent weakness in the euro suggests otherwise. Our short-term and medium-term outlook on the euro is bearish.
EUR/USD is down slightly and trading above 1.1910. The euro is down slightly against the yen, with EUR/JPY trading above 129.90. Finally, the euro is flat against the pound, with EUR/GBP above 0.8790.
This is a relatively light week for the Eurozone economic calendar. MoM German factory orders (-0.9% vs. 0.5% expected) missed expectations. Later today, we’ll see German industrial production figures for March and the German trade balance for the same month. On Thursday, we’ll see the European Central Bank’s economic bulletin. Last week, Eurozone manufacturing PMIs were slightly ahead of expectations while inflation decelerated below expectations.
As the euro runs out of steam, we are now bearish on the currency in the short-term. Looking at various technical indicators, the currency is looking oversold. This is based on a daily chart of the euro currency index.
As the euro weakens, we are now bearish on the currency 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.