Rebound in the euro

The euro will be a currency to watch closely this week particularly after a bit of a rebound in the euro versus the greenback today.

Source: Bloomberg

The greenback is seeing some weakness on the back of the contraction in wages with average hourly wages falling 0.2%. EUR/USD has managed to squeeze back above $1.1800 and is now trading at around $1.1860. There are a lot of key events for the euro this week including Angela Merkel meeting with ECB President Mario Draghi just over a week before the ECB meeting. Perhaps we’ll finally hear some official comments around Merkel’s opinion of Greece. The European Court of Justice is also set to announce its ruling on the legality of the ESM and this will have some significance as officials focus on bond buying. I don’t feel the fundamentals behind the euro are enough to sustain strength for the euro against the greenback. On the USD side of the equation there is quite a bit of fed-speak this week before the feds blackout period kicks in. Looking at the price action, EUR/USD is right on a downtrend resistance line which has been in place since December 16 and failure to close above this line could signal fresh near term weakness. This line kicks in at $1.1870 and failure to close above it will be a good sign for an entry. Stops for the trade will have to be placed above $1.2000 to accommodate for some volatility.


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