EUR/USD: expect consolidation

Elizaveta Belugina

During the past week EUR/USD tested levels above 1.1000, but failed to hold there. This confirms our assumption that bears are ready to sell the single currency on its attempts to recover as they believe that the euro will be declining in the medium term.

Data released in the euro area in the recent days were better than expected. Still, the region offers investors lower yields than the US and this is a serious reason to sell the European currency.

Next week don’t miss flash inflation figures for Germany and the euro area on Monday and Tuesday. On Thursday the European Central Bank will release the accounts of its March policy meeting. A quick reminder: in March the ECB has officially started buying the region’s bonds via quantitative easing program, lifted up 2015 GDP outlook, but cut inflation forecast.

Traders should also be aware of the developments in Greece. The nation is now preparing a list of economic reforms that satisfies its creditors and secures desperately need bailout money transfer. Greek government hopes that the euro area’s finance ministers can meet and approve its reform program as early as next Wednesday. However, the evaluation of Greece’s suggestions by an expert group may take longer, and European ministers may assemble only the week after next.

Technically EUR/USD looks poised for consolidation. Below 1.0800 the pair will likely go down for the retest of at least 1.06. A close above the 1.1050 resistance is needed to open the way to 1.1200. After the consolidation we expect the euro’s decline to resume.

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