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Attention Shifts From The Dollar To The Euro This Week

Published 23/05/2016, 08:27
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General market theme
After a week where the focus was on the US dollar attention shifts away from the US currency and investors will look towards Europe for fresh news and developments during the next few days. The euro will attract their attention the most as the week ahead of us holds a number of important Euro-related reports and they are expected to shape the currency’s momentum and build up expectations for ECB’s future action. Starting today the release of the PMI numbers from the Eurozone should be a good appetizer for the rest of the week as it will point the way for the euro to trade for the next couple of days.

Price action highlights
On Friday the single currency traded higher against the dollar that seemed to have lost its momentum during the final hours of last week and the euro benefited from it. The currency came off its 1.1200 lows and pushed marginally higher but it seems that the momentum behind the previous downtrend that led the rate to these lows is now done and finished and a reversal to the upside is building up momentum. As always we expect a fundamental trigger to generate further momentum behind a change in direction and today’s PMI reports could be that trigger with the euro pushing towards 1.1300 if expectations for a robust reading are met.

The cable traded lower on Friday and after a week-long rally that has driven the currency above the 1.4600 area the pound dropped lower at the end of the week. The rate fell towards the 1.4500 area and it seems that it has found some short-term support around that level and today’s price action will indicate whether the pound will look towards higher ground or the correction will extend lower. With little in terms of reports pending for release cable’s price action will hinge on any fresh Brexit news and polls so be prepared for fresh volatility.

Focus of the day
The focus will be on the euro today with the release of the PMI figures from the euro and later in the day the release of the US PMI levels will do little to shape the dollar’s momentum. So we should focus our attention on the single currency today but also keep an eye out for any fresh Brexit news or estimates as the pound remains sensitive on any fresh developments.

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