EUR/USD: bulls or bears?
During the past week the euro has managed to strengthen versus the US dollar. The negotiations about the Greek debt were successful enough: the nation agreed to begin technical talks with its euro zone partners. The expert group will study how one can combine the existing Greece’s bailout program with the economic plans of the new Greek government. On the basis of this research the specialists will make proposals which will be discussed at the Eurogroup’s meeting on Monday. Most market players seem optimistic as they expect that Greece will get the money and remain in the euro area. The settlement of this question will finally lift the heavy weight of uncertainty and may cause a strong short covering rally in EUR/USD. The deadline for the decision is on February 28, but the main things should be agreed on February 16.
The rest days of the week will be also very eventful for the euro. On Tuesday watch Germany’s and the euro area’s economic sentiment figures and the meeting of the EU finance ministers (Ecofin). On Wednesday the European Central Bank will review the Emergency Liquidity Assistance program for the Greek banks – if by this time Greece agrees to make a concession and extend bailout, the ECB will likely provide liquidity. On Thursday the ECB will for the first time release its meeting minutes providing more information about its historical decision to launch QE. On Friday don’t miss flash manufacturing PMI figures of the leading euro zone’s economies.
EUR/USD is ready to close the week on the upside despite the previous weekly candle with a long upper shadow which should have provoked a decline. It means that the fundamental factors are especially strong now, so traders should take this into account. The single currency has some potential for correction up – it still hasn’t retraced even half of January decline. Resistance is at 1.1500, 1.1600 and 1.1680. Support is slightly above 1.1300 and in the 1.1200 area. In the longer term, however, the general downtrend will resume as the ECB pumps money into the region’s financial system via QE.