How much strength has EUR/USD?
EUR/USD is enjoying powerful support in the 1.1100/1.1050 – here one can find January low, late March and early April highs and May minimum. During the past week the single currency has managed to confidently overcome the 100-day MA below which it used to trade for a year.
The pair has 2 main drivers of growth: weak statistics from the US and rising 10-year German bund yields. The top in the euro will be confirmed only when demand for these securities picks up and their yields turn down.
Traders keep closing short positions on the euro: dollar’s exchange rate has prices in strong policy divergence between the ECB and the Fed, and now these expectations are being played back. Even the expected absence of the Fed’s rate hike in June will affect the US dollar. EUR/USD may rise to 1.1535/1.1585 и 1.1600 before the sellers get active once again. Near-term support is at 1.1200.
However, risks for the euro remain: Greece will soon run out of money. In 2 weeks the nation will once again be on the verge of default. Finance Minister Yanis Varoufakis claimed that he may call for the emergency meeting of the Eurogroup to ask for the delay of the debt repayments which are currently set on July and August. In the long-term if the euro keeps rising, this will hurt the euro area’s economy.
Next week there will be even 3 speeches of Mario Draghi – one on Thursday and two on Friday. In his last speech the ECB’s President repeated that the central bank aims to conduct QE in full volume. In addition, pay attention to the release of German and the euro area’s economic sentiment indexes on Tuesday as well as the European PMIs on Thursday.