According to our yesterday’s analysis, the EUR/USD pair stayed in consolidation mode after reaching the record highs since December 2014. The strenghtening came amid the positive market sentiment towards the euro brough by the expectations that EBC will end its massive fiscal stimulus. Support is set at 1.20, resistance at 1.25.
On Monday, Estonian central bank chief and EBC rate-setter Ardo hansson reinforced the market expectations for a change of the direction of the EBC’s monetary policy. In an interview for a German newspaper Hanson said the ECB could end its 2.55 trillion euro bond-buying program after September if the economy and inflation develop as now expected.
The euro is now seen around $1.2263 level after getting close to $1.23 on Monday, the highest level since December 2014. Most analysts unanimously claims the euro should remain supported thanks to good economic condition in particular UE countries. Some voices emerged, that the euro’s strength doesn’t take any stance on this issue at the moment.
The US dollar suffered on the positive sentiment towards the euro. The markets are strongly convinced that the US economy won’t be able to expand in the same pace as the euro zone countries, whose currencies may gain due to faster monetary policy tightening. Although the Fed plans to hike rates three times this year, this plan may still be endangered by slow inflation growth.
Pic.1. EUR/USD chart.
After breaking above the 1.20 level, the euro still enjoys a strong market sentiment. Except the German CPI, the economic calendar is nearly empty and we expect the current consolidation to continue. Temporary drops may be a chance to open CALL options.