The euro is currently mixed. The common currency is weakening against the US dollar and the Canadian dollar, while making gains versus the Japanese yen, the British pound and Australian dollar. Looking at EUR/USD, the pair weakened sharply yesterday and continues to sell off today. As the outlook for Eurozone growth darkens while both US growth and inflation accelerate, the pair looks destined for further losses. In the short-term, EUR/USD is looking oversold and is due for a rebound.
While Eurozone economic data announced yesterday was better than expected, the figures had a limited impact on the currency. While select economic data may be above expectations, significant weakness in the currency suggests that the overall trend is negative. So far, weakness in the currency has been the result of decelerating growth in the Eurozone. If the ongoing deceleration turns into a significant downturn, the euro is likely to fall even further. As we explained in today's US dollar daily update, there are many catalysts driving USD today. Looking beyond Europe, weakness in emerging markets can also push up the dollar. This is particularly the case as emerging market borrowers struggle to repay USD loans, and dump non-dollar assets in order to raise cash. Our short-term and medium-term outlook on the euro is bearish.
EUR/USD is down slightly and trading above 1.1840. The euro is up against the yen, with EUR/JPY trading above 129.760. Finally, the euro is flat against the pound, with EUR/GBP above 0.8750.
This is a relatively light week for the Eurozone economic calendar. MoM German factory orders (-0.9% vs. 0.5% expected) missed expectations. YoY German industrial production figures for March (3.2% vs. 3.0% expected) and the German trade balance (€29.1b vs. €27.0b expected) were ahead of expectations. Tomorrow, 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.