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Currency Analyst since 2010

EUR/USD: decline is not over

By Elizabeth Belugina

It was a week of slow, but sure decline for EUR/USD. Bomb attacks in Brussels and more hawkish comments of the Federal Reserve members affected the single currency. The ECB officials, on the other hand, signaled that interest rates could go lower.

Economic data from the euro area were much better than expected. Composite PMI rose from 53 in February to 53.7 in March reversing to the upside after 2 months of declines. Yet, the figures don’t mean that the sluggish European economy is doing better.

Next week the most important release will probably be the euro area’s flash inflation figures on Thursday as well as the publication of the ECB monetary policy meeting accounts. The region’s consumer prices fell by 0.2% in February and there may be another weak reading in March. The pair will also be sensitive to American releases. Unless US labor market data brings negative surprises, the greenback will be able to keep strengthening. Market players will also want to see whether the Fed’s Chairwoman Janet Yellen follows the hawkish statements of other FOMC officials.

EUR/USD is undergoing a broad consolidation phase. The risks are for the single currency to get lower and test 1.1080 and 1.1050. This area, however, should provide good support. Resistance is at 1.1220 and 1.1270.

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