Eur/usd - page 241
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EUR/USD Forecast Mar. 23-27
EUR/USD certainly enjoyed a recovery, resulting mostly from weakness in the USD. Has it bottomed out? A testimony by Mario Draghi, PMIs and another important German survey are the big events of the week. Here is an outlook for the highlights of this week and an updated technical analysis for EUR/USD.
Yet again, German business sentiment fell short of predictions. The Greek crisis is still around with ongoing discussions and tensions. In the US, the Fed certainly sounded more dovish despite removing the “patience” guidance. This hurt the dollar badly and even sent EUR/USD above 1.10 temporarily. However, this was quickly reversed. The pair staged a second late rally.
EUR/USD weekly outlook: March 23 - 27
The euro was sharply higher against the dollar on Friday, notching up its largest weekly gain against the greenback in almost three years as doubts over the path of U.S. monetary policy pressured the dollar lower.
EUR/USD was up 1.52% to 1.0820 late Friday. For the week, the common currency gained 3.2%, the largest increase since October 2011.
The sharp drop in the dollar came about amid uncertainty over the path of U.S. monetary policy after the Federal Reserve downgraded its forecasts for growth and inflation and lowered its interest rate projections on Wednesday.
The Fed statement dampened expectations for a mid-year rate hike, prompting investors to exit positions which would benefit from a strong dollar, sparking volatility in the foreign exchange market.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, ended the week down 2.53%, posting the biggest weekly decline since October 2011.
Despite the past week’s reversal the dollar looks likely to continue to strengthen, with the Fed still expected to raise interest rates ahead of other central banks.
The euro has fallen around 10% against the dollar so far this year and the European Central Bank’s trillion-euro quantitative easing program, which launched earlier this month, is set to continue to act as a drag on the single currency.
In the week ahead, investors will be focusing on Tuesday’s U.S. inflation report after Fed Chair Janet Yellen warned last week that the stronger dollar was pushing down inflation.
Survey data on euro zone private sector activity, due for release on Tuesday, will also be closely watched.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
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Let's see how the market is going to open with the strong resistance ahead.
EURUSD rose on Friday’s session and close near the high of the day in a typically digestion day, creating the 2nd inside day. The pair is consolidating waiting for the big move one way or another. It’s coming.
Bundesbank Sees 'Strong' Growth in 2015
Germany's Bundesbank, the country's central bank, said in its fresh monthly report released on Monday that it expects strong economic growth in the first half of 2015.
"The German economy, following surprisingly strong growth at the end of 2014, should have continued to grow strongly in the first quarter of 2015," the bank wrote in the document.
Growth will be driven by robust exports and private consumer spending, the central bank predicts.
"For the second quarter, too, the robust economic uptrend will continue. The main driving forces are foreign demand, private consumption and, to a lesser extent, residential construction," the report said about the economic prospects.
Q4 GDP
The Germany's economy grew by 0.7% in the fourth quarter of 2014, better than expected, as it emerged from a temporary decline in the preceding quarters to lift annual GDP to 1.6%.
"In a quarter-on-quarter comparison (adjusted for price, seasonal and calendar effects), positive contributions mainly came from domestic demand. The final consumption expenditure of households rose by another 0.8% and government final consumption expenditure increased by 0.2% on the previous quarter. A positive development was also observed for fixed capital formation. Gross fixed capital formation in machinery and equipment (+0.4%) and in other products (+0.2%) showed moderate increases, in construction it was markedly higher (+2.1%) than in the third quarter of 2014," according to a report from Destatis, Germany's statistical office.
Draghi Welcomes Weaker Euro, Invites Recovery
The recently kicked-off QE program, combined with the weaker euro and lower oil prices have been benefiting the recovery on the old continent, ECB president Mario Draghi said Monday, providing the optimistic forecast that growth was gaining momentum.
"The ECB's extra stimulus is key for recovery," Draghi told the European Parliament, adding that the bank observed "a weak recovery" even before the program had been launched.
Easing lending conditions are progressing, hand-in-hand with a resurgent demand for credit, he claimed, as lower rates have been filtering down the chain.
"Additional measures may be used to improve banks capital and liquidity positions," he said, without elaborating further details.
'Ample liquidity'
Turning focus to the QE program itself, he downplayed concerns that Eurosystem banks won't find a sufficient chunk of bonds to buy.
"Overall program is on track to reach €60 billion for March," he claimed, reassuring lawmakers that the overall implementation has been "very smooth and liquidity ample".
At the same time, however, he mentioned even some negative side effects of the program: "Asset prices may increase to levels not justified by fundamentals," he warned. Therefore, the ECB has been closely monitoring risks to financial stability.
Moreover, the central bank may limit, or increase capital requirements, to banks who have a large exposure to certain asset classes, he noted.
On inflation, Draghi said the price growth in the bloc is expected to remain very low or negative over the coming months. However, he anticipated the gauge to rise "towards the end of the year".
we had our break over the resistance today price is continuing to rise in a healthy way the next resistance on the way is 1.1000
Ifo Preview: German Business Optimism Seems Unstoppable in March
German business morale is expected to extend its rally to an eight month high in March, economic desks anticipated, as the latest stimulus from the ECB - combined with the weaker euro and lower oil prices - has been nourishing Europe's powerhouse.
The headline Ifo Business Climate Index is expected to rise to 107.3 during the third month of the year, up from the 106.8 seen in February.
That would be the strongest reading since July last year, when the gauge hit 108.0, and already the fifth straight month of improvement.
Happy-go-lucky managers
Even both sub-indexes - tracking the development in the current situation and future anticipations - are projected to book better results. In case of the so-called Current Assessment gauge, the sub-index is expected to rise to 112.0 in March (also its 8-month high), up from the 111.3 seen in February.
The indicator of business expectations for the next six months is forecast to improve to 103.0, up from 102.5 seen in February, also hitting its eight-month high.
The monthly index is based on a survey of around 7,000 German firms in the manufacturing, construction, wholesale and retail sectors.
Robust growth
So, the results are expected to show that the growth in Europe’s largest economy is accelerating amid lower oil prices and a weaker euro. On Monday, Germany’s Bundesbank said the nation's economy will notch up "strong" growth in the first half of 2015, driven by robust exports and buoyant consumer spending.
"For the second quarter, too, the robust economic uptrend will continue. The main driving forces are foreign demand, private consumption and, to a lesser extent, residential construction," the report from the central bank said.
Back on February 16, the Bundesbank said that 2015 growth will probably exceed its December forecast of 1.0%. The European Commission forecast a 1.5% hike.
Apart from the €60-billion-a-month "blessing" from the ECB - and the euro gravitating toward parity with the dollar - and the persistently low oil prices, the reading is expected to confirm one more thing: German firms haven't really feared full escalation of the Greek crisis, or at least, are not afraid of a "Grexit".
source
EUR/USD continues rally, remaining above 1.09 in U.S. afternoon trading
While the U.S. dollar extended its recent slide against the euro on Monday, comments from Federal Reserve vice chair Stanley Fischer and leaders in Europe discussing the Greek financial crisis had little impact on currency prices in afternoon trading.
EUR/USD reached 1.909 on Monday, its highest level in two weeks, before falling back slightly to 1.094 in afternoon trading. When EUR/USD fell to 1.0987 on Mar. 5, it marked the first time the pair slipped below 1.10 in 12 years, as expectations of an expected interest rate hike from the Federal Reserve coincided with the start of a €60 billion a month bond buying program.
The pair continued its steep depreciation to 1.05 levels on Mar. 13, before reversing in the middle of last week following relatively dovish comments by Fed chair Janet Yellen on slower than expected inflation and GDP growth. The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell more than 0.75% on Monday to 97.24.
Striking a well-balanced tone in a speech to the Economic Club of New York on Monday afternoon, Fischer indicated that the Fed will begin raising interest rates when the benefits of lift-off outweigh the costs. Fischer reiterated that the Fed will likely raise interest rates at some point this year.
In addition, Fischer added that a "smooth plan upward will certainly not be realized," as the Fed has no plans for regular rate hikes. The stance differs from one the Fed employed on two occasions in 2004 and 2007 when it employed a model for steady rate raises on a long-term basis.
Although the Fed is hesitant to discuss the strength of the dollar relative to the euro and other currencies, Fischer indicated that it is keeping a closing eye on exchange rates to guard against potential cases for manipulation of the foreign exchange markets.
"What is not acceptable is manipulating exchange rates, trying to use them as the sole means of generating growth," Fischer said. "That has not happened as far as we can tell in our partner countries."
Elsewhere, Greece prime minister Alexis Tsipras and Germany chancellor Angela Merkel put on a public display of goodwill during Tsipras' first visit to Berlin since he was elected earlier this year. Still, there were no indications on whether any progress had been made in negotiations on extending the euro zone's bailout package to Greece during talks on Monday.
Meanwhile, Mario Draghi expressed frustration with Athens in testimony before the European Parliament when a member from Portugal asked the head of the European Central Bank to respond to accusations that it is blackmailing Greece into accepting strict austerity measures.
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