Fundamental Analysis:

The EURO slumped against the U.S dollar during last weeks trading session for the fifth straight session on Friday, falling to one-month lows as the contrasting monetary policy stance of the European Central Bank with the Federal Reserve acted as a drag. Falling European interest rates drove investors into greenbacks and the yen.

The single currency has already weakened broadly this year after the ECB unveiled a trillion-euro quantitative easing program in January. The bank started asset purchases last month, pushing euro area bond yields to new lows.

Demand for the dollar was underpinned by expectations for higher interest rates, as investors regained confidence that the U.S. economy would continue to recover after recent economic reports pointed to a slowdown at the start of the year.

The greenback received a boost earlier in the week after comments by the presidents of the New York and Richmond Federal Reserve banks made the case for the Fed to begin policy tightening as early as the summer.

Some investors had pushed back the timing of a rate hike until late 2015 after a surprisingly weak U.S. employment statistics report for March.


Technical Analysis:

The pair’s sharp fall last week argues that correction from 1.0461 has completed already after price rejections occurred at 1.1041, 1.1050, and 1.1034 resistance respectively.

Weekly Initial bias stays on the downside for this support first(1.0461). Break will extend larger down trend to next fibonacci level at 1.0283. Above 1.0712 will delay this bearish case and will turn bias neutral first. In any case, outlook stays bearish as long as 1.1096 support turned resistance holds and downside breakout is expected.

In the week ahead, Wednesday’s monetary policy announcement and press conference by the ECB will be in focus. U.S. data on retail sales, inflation and consumer sentiment will be closely watched for further indications on the strength of the recovery.

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