euro, dollar

Reflecting the actual eurozone’s top 1 problem – Greece, euro is losing its steam again as there is no optimistic news in sight to come and boost the currency as the latest inflation data or negative rumours about dollar.

During this year, after the Q1 disappointment in the US, we can see a higher sensitivity of traders on the euro, while they are not that keen to boost dollar even further in case of positive news. On Thursday, US retail sales provided an optimistic boost for the dollar, nevertheless a correction followed soon, what was not seen on the euro.

Now everything is getting prepared for the so-much mentioned Federal Open Market Committee (FOMC) meeting, albeit June’s rate-hike is highly non-anticipated. As we wrote in previous articles, actual rate-hike bets have been postponed to September or December and recent positive data are keeping attention to the earlier of these two terms.

Even key market players are starting to bet more on September’s liftoff and dollar’s strengthening as for example Barclays team, or Danske Bank, which even reported that after first rate-hike additional 100bps are expected over the year after first tightening.

The euro area is a different story from the fundamental point of view and now is facing scepticism as the International Monetary Fund (IMF) team is moving back from Brussels with no deal made and signs of no agreement by the end of this month seems to be justified. Although the June 30 does not mean the formal end, as the IMF’s procedure is extremely long (some time until loan default, after deadline greece will be urged to pay, Greece will inform that it is not able to pay, then direct appeal to FinMin, 1 month time to repay loan, IMF’s Board informed about it, decision of IMF’s Board).

Moreover, we can not neglect a difference in inflation, albeit weaker euro is naturally a more friendly connection to inflation acceleration as strong US dollar for the US inflation. Nevertheless, high unemployment, mostly in periphery states, remains in need of structural reforms, so much mentioned by the European Central Bank’s President Mario Draghi.

From the technical point of view, our long-term target for the dollar remains at $1.0491, while previous can be set at $1.0719. From a short-term, target point may be set at $1.0966.

In case of euro’s further strengthening, watch the resistance level at $1.1367 to be tested with the next one at $1.1443.

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