EUR/USD Remains Above $1.3600
FBS | May 27, 2014 08:51AM ET
EUR/USD rose to $1.3668 (Tenkan-sen at H4). Despite the dovish comments from the ECB and some technical signals (break below April 4 low), the bears failed to break below the psychological levels of $1.3600 and now we are witnessing short covering.
The
Euro got some support from a good performance of the eurozone’s peripheral stocks and narrower yield spreads after the elections. The US dollar, on the other hand, is weaker ahead of the core durable goods release today at 12:30 GMT (forecast +0.2% vs. previous of +2.4%). On Thursday, the US will publish revised Q1 GDP figures (analysts expect -0.6%). Bad data today will reinforce negative expectations about this upcoming economic growth release. We’ll hear from the ECB President Mario Draghi at 13:30 GMT. Yesterday Draghi signaled that the ECB stands ready to ease policy in case of lower inflation. Still, this is already priced in, and investors are now trying to guess whether there’s something more substantial – like asset purchases – on the table. Although the regulator has made a step towards QE, the chances of this measure still aren’t very high. According to the ECB Executive Board member Peter Praet, QE will only come to that if the euro zone economy and inflation develop significantly worse than the ECB expects. As a result, there’s the risk that on June 5 the ECB won’t deliver as much easing as some expect.
To continue the upward correction, the bulls need to overcome $1.3670. The next obstacle will be $1.3700 ahead of $1.3735/40. Support is at $1.3615, $1.3600 and $1.3584.
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