EUR Bulls to Step in at 1.36, Outlook Remains Challenging: Euro Exchange Rates 10/02

Modified: Monday, 10 March 2014 21:46 GMT
Written by: Gary Howes

The euro exchange rate complex is today higher with strong gains being witnessed across the board. The outlook for the euro is however decidedly mixed.

Asian central banks and a sovereign wealth funds were offering EUR/USD at 1.3650 throughout the London session and this has kept the pair just below the trendline resistance at 1.3655.

A look at the foreign exchange markets on Monday morning show:

The euro dollar exchange rate is unchanged at 1.3634.
The euro pound exchange rate is 0.13 pct higher at 0.8320.
The euro Australian dollar exchange rate is 0.35 pct higher at 1.5275.
The euro Canadian dollar exchange rate is 0.09 pct higher at 1.5058.

Note: All EUR quotes here refer to the wholesale spot market. Your bank will charge a spread at their discretion when passing on a retail rate. However, an independent FX provider is so well placed on the market that they are able to deliver you up to 5% more currency. Please learn more here.

Outlook for the euro today

"The EUR/USD has had a quiet start to the week after rallying strongly following Friday’s worse-the-expected NFP report. As of writing, the pair is consolidating in the mid-1.3600s with no strong momentum in either direction. Given the dearth of economic data in today’s North American session, more consolidation is likely in the near term. To the topside, resistance is likely at the Monthly R1 Pivot (1.3680) and the 1.3700 round handle. Meanwhile, bulls will look to step in at 1.3600 or the central Monthly Pivot (1.3580)," says Matt Weller at GFT.

While the euro is powering higher on Monday it is worth reminding that the currency remains vulnerable.

Analyst Anders Vestergård Fischer at Danske Bank says the longer-term outlook does not favour the euro:

"EUR/USD gained further support Friday on the back of the weak US labour market report. However, while the lack of further monetary easing from the ECB and the possibility of US macro data disappointing in the coming months might support the cross near term, we still look for EUR/USD to edge lower in the medium to long term as the Fed is expected to continue to taper its bond purchase programme."

"The lack of any action from the ECB triggered a EUR rally last Thursday, but the EUR is still vulnerable against currencies of countries with better growth prospects if there is any recovery in risk appetite," points out Lloyds Bank Research.

For now, slightly softer data in the US and even the UK may mean a period of stability.

The German Constitutional Court statement on Friday was initially seen as a potential EUR negative, but most now see their referral of the OMT to the European Court as effectively an acceptance that they have no authority over ECB actions, so the net effect on the EUR is slightly positive.

"For now, the EUR/USD seems likely to stay rangebound with 1.3580-1.3680 likely to contain activity," say Lloyds. For EUR/GBP forecasts please see today's report.

UBS analyst Geoffrey Yu says: "The latest recovery does not change the bearish picture as long as resistance holds at 1.3639. The risk is for resumption of downtrend from here to break through support 1.3458 and then test 1.3400."

UniCredit Bank give their predictions on the euro dollar exchange rate saying:

"Range-bound activity at around 1.36 is likely to continue today on the back of a very light agenda and some prudence ahead of tomorrow’s
testimony by the new Fed chair Janet Yellen. Charts indicate 1.3550 and 1.3650 as the two key levels to be monitored at the moment."