Wednesday, February 21, 2018
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EUR/USD continues gains, looking to 1.2500 ahead of EZ CPI
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  • EUR/USD up in Asia, looks to extend gains
  • Euro bulls not ready to give up following last week’s challenge of the 1.2500 handle

EUR/USD continues to gather steam on the current bull trend, with the broad dollar index continuing to fall away under President Donald Trump’s administration, and preliminary inflation data for the EZ continuing to show promise.

European markets continue to show a willingness to continue Asia market sentiment, with downside risks for the EUR/USD diminishing as European economic data, while not always hitting the mark and coming in soft, is rarely disappointing traders looking to bid up the European currency bloc.

Plenty of economic data is on the docket for the Euro session today, with German Retail Sales, Swiss Consumption Indicator, French EU-normalised CPI, and German Unemployment data all coming out between 7 and 9 am GMT. An hour later, CPI inflation data for the Eurozone will publish, where Euro bulls will be hoping to find enough indications of future economic growth to keep the ball rolling uphill.

As noted by the Welss Fargo Research Team, “CPI inflation fell significantly from 2012-2015, causing the ECB to cut policy rates and implement a quantitative easing (QE) program. As inflation slowly begins to pick up and growth remains solid, the Governing Council is now tasked with ending its QE program and eventually beginning to hike rates. We look for the ECB to gradually begin to raise rates in H1-2019 by first hiking its deposit rate, while keeping the overnight interbank rate and two-week refinancing rate unchanged. In the midst of a slow path toward policy normalization, our currency strategy team looks for the euro to appreciate against the dollar as the greenback weakens over the coming quarters and the ECB gradually begins to tighten. Although growth is increasingly broadbased, we also acknowledge several risks to our outlook, including political uncertainties in Germany and Italy or the potential for another sovereign debt crisis like the one seen in 2010-2012. That said, we see these risks as largely manageable at present, and look for real GDP to increase 2.2 percent in 2018 and 2.0 percent in 2019.”

EUR/USD Technicals

Own Valeria Bednarik, Chief Analyst, comments: “The pair has managed to recover above the 23.6% retracement of its previous three week’s rally at 1.2390 but trades too close to it to confirm an upcoming steeper recovery. Furthermore, and in the 4 hours chart, the pair is struggling around a bearish 20 SMA, while the Momentum indicator lost its upward strength right below its mid-line, as the RSI also hovers within neutral territory, currently at 52. The pair bottomed twice this week around 1.2335, making of the level the immediate support ahead of 1.2300, the 38.2% retracement of the mentioned advance.”

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