Euro rate today (19/11): EUR exchange rates see strength ebb away as momentum runs out
A break back into the 1.35's is thus likely in the near-term.
Offering support to the major euro rates today is the German ZEW Survey for Economic Sentiment (Nov) which beat expectations coming in at 54.6. Analysts had predicted 54. However, the rest of the calendar is light and we suspect markets will continue to place a great deal of focus on technical levels.
A look at the latest rates shows the euro dollar exchange rate is 0.07 pct lower than seen at last night's closing level at 1.3495. The euro pound exchange rate is meanwhile trading 0.12 pct higher at 0.8394.
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Euro tipped to consolidate gains
Concerns that the euro will return to strength following this month's interest rate cut have indeed proven to be well-founded, perhaps to the horror of officials at the ECB.
"Even though ECB officials have continued to stress the case for more easing, the downside from this risk seems quite limited for the moment, and without weaker Eurozone data the recent lows seem unlikely to be tested unless the prospect of US tapering in December is reignited," says a note on the EUR from Lloyds Bank Research.
According to Ipek Ozkardeskaya the technical outlook is turning increasingly positive for the Euro:
"The week started with numerous bullish attempts in EURUSD, mainly catalyzed by dovish Fed expectations and more economic freedom plans from China. Although the technical indicators remain subdued (MACD below the zeroline), the EUR-bulls are gaining field through higher-high-higher-lows pattern building since November 8th.
"Moving forward, in lack of major data/event, EURUSD is likely to consolidate gains. On the upside, 1.3550/60 (fibo 61.8% on Sep-Oct pickup) is the first resistance zone in target, if breached should lift EURUSD to its 21-day moving average of 1.3575."
Gareth Berry at UBS does however opt to take a contrarian view on the EUR/USD saying he is bearish on the exchange rate's prospects:
"With the MACD still below its zero line, indicating a bearish trend, any further recovery will find strong resistance at 1.3564. While this holds, there’s scope for resumption of weakness to support at 1.3419 and then onto 1.3293."
Berry is similarly bearish on the euro pound exchange rate:
"Focus on the momentum tools as a closing cross lower would reinforce the bearish theme, opening the doors to the critical support area at 0.8301 and 0.8285. Resistance is at 0.8416."
However, Ozkardeskaya says she sees upside for this pair as being limited: "regarding EURGBP, the option barriers kept the upside limited below 0.8400/10, light option offers remain at these levels."
Nevertheless, "with trend and momentum indicators in negative territories, we keep our bearish view in EURGBP and expect limited upside with key resistance zone seen at 0.8435/50 (21 & 50 dam)," says the Swissquote analyst.
Elsewhere on the FX markets, high-beta currencies spiked in late Asian trade on comments from PBOC chief Zhou the suggested China will undertake a series of reforms of its capital markets.
Zhou stated that China will set up a managed floating yuan expanding the current tight currency exchange rate band.
The country will also remove some restrictions on Qualified Foreign Institutional Investor program and will open up its capital account but impose temporary curbs if needed.