Euro Exchange Rate This Week: Predictions for GBPEUR and EURUSD
The euro is tipped to remain in a consolidation pattern against the US dollar over coming days however it is against the British pound were meaningful moves could occur.
The euro is softer at the start of what should be an interesting week for those watching the exchange rate markets.
Modestly improved risk sentiment was enough to cause the euro to lose some ground against the U.S. dollar.
European stocks were higher while U.S. futures pointed to Wall Street following suit when North American trade gets under way.
"The mostly risk-off feel to the new year has worked in the euro’s favor as it’s enticed skittish traders to shift the carry trade of selling the euro for better yielders into reverse," says Joe Manimbo, analyst at Western Union.
ECB Minutes Ahead
The release of the ECB minutes on Thursday could revive the debate about whether the governing council are likely to increase QE – particularly in light of recent poor inflation figures which spooked investors just as everyone was beginning to relax.
According to analysts at TD Securities investors should scrutinise the minutes for signs of consensus amongst members for more accommodation:
“Look closely for signs of the degree of consensus among Governing Council members, and the willingness (or lack thereof) of some to consider looser policy in 2016 under the right circumstances.”
Divergence between ECB and Fed policy outlook could be a source of further weakness in EUR/USD, according to ABN Amro:
“Going forward we expect sentiment in currency markets to calm down and investors to refocus on monetary policy divergence. Therefore, we expect EUR/USD to decline to below parity this year.”
On the data front the week is relatively quiet for the euro, although Euro-zone Industrial Production is set to release on Wednesday could add some volatility into the mix, and there is a lot of German data on Thursday.
In the case of Germany there is GDP yoy in 2015 (it was 1.6% in 2014, and German Public Finances and GDP-Balance ratio (prev 0.4%).
Latest Pound/Euro Exchange Rates
  | Live: 1.1452▲ + 0.08%12 Month Best:1.2162 |
*Your Bank's Retail Rate
| 1.1063 - 1.1108 |
**Independent Specialist | 1.1292 - 1.1337 Find out why this is a better rate |
* Bank rates according to latest IMTI data.
** RationalFX dealing desk quotation.
Technical Outlook
Euro to Dollar Exchange Rate
The pair is basically moving sideways after a false break-down from a consolidation pattern.
This is also part of a much bigger sideways pattern clearer on higher time-frame charts.
I’d hesitate to forecast a currency which is so range-bound, however, if there is more downside, then a break below 1.0710 lows would probably see a capitulation to 1.0666.
Alternatively, a break above 1.1070 would be expected to mark a resumption of the mini-up-trend to 1.1230.
Volume is bearish but my primordial hunch is saying it could surprise to the upside – so be prepared for anything.
Pound to Euro Exchange Rate
The month of December represents a particularly strong move lower lower for the GBP to EUR conversion rate, and a possible predictor of further weakness, however, first it would require a breakdown through the neckline of a large bearish head-and -shoulders pattern visible on the weekly charts, at 1.3300, for confirmation of a break lower.
The existence of the S1 Monthly Pivot at 1.3268, however, is another obstacle the pair needs to leap-frog to open the way lower.
A clear 20-point move below the pivot at 1.3248 could be enough to confirm a break.
Such a move could see a dramatic devaluation as head and shoulders triggers lower.
First stop would be psychological 1.3000 level followed by 1.2664, near the 200-week MA.
