The last couple o weeks gave the euro a solid ground at least for a decent upward correction. The Greek worries seemed overdone, the stock markets rallied (which usually helped the European currencies vs. the dollar) and the Fed made it clear it is in no rush to tighten the monetary policy despite a surprising hike in a discount rate in February. Still gains in the euro were uneven and moderate at most. Until the last Thursday bulls on the pair could had hoped to see a saucer formation but the very first test of it (1,38) exposed their weakness. The reaction to the decision taken by the Bank of India (hiked rates by 25 bp last Friday) is another proof the euro is unlikely to turn bullish any time soon.
A relatively light calendar in the days ahead means few opportunities to change this picture. And that means chances are for the 5th wave (Elliot) dragging the pair at least to 1,30. The last on the only obstacle is the solid support at 1,3435. With some support from the data (especially the Ifo on Wednesday), the grimmest scenario might be delayed but not necessarily negated.
Similar refers to the pound which looked oversold in a reaction to the Prudential’s decision (to buy Asia’s business from AIG) on the March 1st. Since then the cable (GBPUSD) inched up and the British currency performed better than the euro. The party didn’t last long though as the pound was losing ground not only vs. the dollar but also the euro on the back of BoI’s decision. Even if the pound doesn’t underperform against the euro (0,9150 on the EURGBP looks very solid) it is bound to go down against the dollar if the EURUSD draws a fore mentioned 5th wave. The Swiss franc did better so far but since all time lows on the EURCHF are within a reach, it might be exposed vs. the dollar in a similar way as the euro.
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Przemysław Kwiecień  |
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X-Trade Brokers Dom Maklerski S.A. does not take responsibility for investment decisions made under the influence of the information published on this website. more
