Is Euro REALLY recovering?
I’m back from Hawaii to the cold city that still loves to trade and I’ve had enough time to catch up with all the moves our currency pairs made during my absence. And guess what? I made some pips while I was away on the EUR/USD pair as it reached our bearish target. You may have noticed Mr. Euro recovering in the past few days and Ms. USA getting a bit down, but is the Euro zone really doing better?
EUR/USD reached our bearish target at 1.0450 and currently rebounding towards the 23% Fibonacci level which is set as our new bullish target at 1.1263. That is of course if the pair breaks above our pivot level of 1.09. With the MACD line crossing above the signal moving average, if the pair successfully breaks above the Ichimoku cloud, we could see even more gains towards 38% Fibonacci level at 1.1778.
Our technical analysis is aligned with ECB Governor Mr. Mario Draghi also known as super Mario, who has been pretty upbeat in his recent testimonies and with Euro zone’s top economies’ printing stronger than expected hiring gains, consumers and investors in the region seem to be sharing Super Mario’s upbeat outlook. These are all despite the mixed picture we got from the latest PMI readings.
Price levels in most economies still haven’t recovered from the oil price slump, but the euro zone managed to post stronger than expected headline and core CPI readings for February. Headline inflation posted a 0.3% annualized decline, better than the projected 0.5% drop and the previous month’s 0.6% tumble, while core inflation showed a higher than expected 0.7% gain year-over-year.
Components of the report revealed that energy and transportation costs were generally weaker during the period while rent and price levels in restaurants posted gains. According to Draghi, the ongoing ECB quantitative easing program and the euro’s depreciation should help keep inflation supported. Leading inflation indicators such as the PPI, however, are hinting at further weakness in CPI readings.
How Does a Falling Euro Affect You?
Currency fluctuations affects almost all global citizens especially if they like to shop or travel. Even more so these volatilities affect large companies that import/ export their products to foreign countries. A falling euro makes it harder for U.S. companies to sell their goods abroad and saps the returns from overseas markets.
Moreover, The euro's drop hurts U.S. companies that do business abroad. A report by currency risk management consulting firm FiREapps says U.S. companies lost $18.66 billion in the fourth quarter because of currency conversion.
Do you think Mr. Euro will continue to move up, or this is just a temporary correction? Come on over to our Facebook page and let me know.