Euro Exchange rate lower - but for how much longer against the US Dollar

Foreign Exchange - Pounds Sterling and Euro Exchange Rate Outlook

What's Happening This Morning: After spiking up before the US open yesterday to 1.3071, the euro exchange rate slid all day and corrected to almost exactly 50% of the upmove at 1.2950 after the New York close yesterday. Then it bounced around in a narrow range, failing to recapture either the high (only 1.3012) or the low, although near 8:30 am ET, foreign exchange traders started selling euros and the exchange rate slipped to 1,2934, near the Fibonacci 62% retracement level.

So we had a Monday pullback and now perhaps a bigger Tuesday pullback, but never mind. Unless the euro rate breaks the 62% Fibonacci level on the hourly chart at 1.2924 to (say) 1.2900, we must expect a test of the previous high, and thence another big move up - unless the previous high turns out to be a resistance barrier and we end up with a going-nowhere sideways move.

This morning the euro exchange rate got support from the ZEW research institute reporting sentiment among investors and analysts up for the 5th month in a row, albeit still negative, from -5.8 in Feb to -3.5 in March. According to Bloomberg, forecasts had a consensus outlook for -8. The euro rate is also influenced by a debate over whether the ECB can or should take rates to zero.

Overnight in Singapore, the euro exchange rates got support from a statement in the German newspaper Handelsblatt by German ECB board member Stark, who said too-low rates could help cause an asset bubble and might allow banks to avoid cleaning up their balance sheets.

"We still have some room to move rates down further,"

but

"From today's perspective it does not make sense to define a limit. For me personally, however, the limit is not far from what we have at the moment."

This implies a positive yield differential against US paper for some time to come.

Pounds to US Dollars = 1.4022
Pounds to Euros = 1.0781
Euro to Pounds = 0.9270
Pounds to Australian Dollars = 2.1180

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
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