Euro Exchange Rates 30/01: EUR Weakens, Forecasts Suggest EUR Complex Will Remain Firm

By Gary Howes

Euro rates are today in recovery mode and the outlook remains firm with analysts forecasting the euro to remain supported for the duration of the session.

The euro has today recovered after ECB’s Noyer’s comments about Euro strength countering the ECB’s price stability goal prompted EUR to trade lower yesterday, however the moves were not sustained.

Following on from what proved to be a volatile day for the euro we see a more confident shared currency on Thursday:

• The euro dollar exchange rate is today 0.38 pct higher on a day-to-day basis; EUR/USD is quoted as being at 1.3608.
• The euro pound sterling exchange rate is 0.07 pct higher at 0.8255.
• The euro Australian dollar exchange rate is 0.77 pct lower at 1.5516.

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Update: "Looking ahead, the focus continues to be on the emerging markets. While the Turkish Lira, South African Rand and Russian Ruble bounced today, the Hungarian Forint and Polish Zloty continued to fall. The euro has been hit hard by the turmoil in the region and further losses are likely. We expect a move down to 1.35 in the EUR/USD. - Kathy Lien at BK Asset Management.

Today's data is broadly supportive

There were a few data points out today which proved supportive to the euro, particularly the positive beat on Services Sentiment:

• Consumer Confidence (Jan) came in at -11.7, in line with expectations and improved on the previous month's -13.5.
• Economic Sentiment Indicator (Jan) came in at 100.9, below expectations at 101.0 but improved on a previous reading of 100.4.
• Industrial Confidence (Jan) read at -3.9 which was actually worse than predictions for -2.8 and last month's -3.4.
• Services Sentiment (Jan) that got markets buying the euro. The reading beat expectations coming in at 2.3, last month was a mere 0.4.

According to Lloyds Bank the next major test for the euro exchange rate complex comes tomorrow with the Eurozone aggregate CPI print.

"Concerns about weak inflation remains key to ECB monetary policy, so we expect increased focus on CPI releases ahead of next week’s ECB rate meeting. The market expects a rise in Germany HICP to 1.3% y/y. German CPI are released by region first before the aggregate print is released at 1pm, so these numbers may trigger some market reaction if they deviate from last month’s print," say Lloyds.

Euro dollar exchange rate forecasts for today

Here are a select of forecasts for the headline euro dollar exchange rate as compiled by Pound Sterling Live:  

• UniCredit:

"The expected sharp deceleration of US GDP growth in 4Q14 may offer EUR-USD new support today following the Fed outcome. Charts still indicate 1.37 and 1.3760 as the key resistance levels to be broken."

• UBS:

"Support lies at 1.3596, a break below which would expose 1.3508. Resistance is at 1.3746, a close above which would be a bullish development."

• Forex.com:

'EUR/USD held above 50-day SMA & suport at 1.3645/50 on a closing basis. FOMC decision tonight may help price return towards LT trendline ~1.3560 or resistance at 1.3745 (61.8% of down move from Dec peak)."

• City Index:

"Moving further into 2014, the outlook remains modestly bullish, despite the current pullback. Still comfortably above its 200-day moving average and within the confines of a bullish trend, EUR/USD could well seek further upside to extend the entrenched uptrend. The key upside targets on a trend resumption reside around the 1.4000 psychological level and then the 1.4250 resistance level.

"To the downside, on any further pullback, major support continues to reside around the 1.3300 level."