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COZfx: Deflation risks in the Euro-zone low but not zero, Li

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COZfx: Deflation risks in the Euro-zone low but not zero, Li

Postby dwang » Fri Mar 28, 2014 2:25 am

COZforex: For the past trading session, EUR dropped 0.25% against the USD and closed at 1.3786, as the latter advanced following a report that showed durable goods orders in the US rise more-than-expected 2.2% in February, ending two straight months of declines. Separately, another report from Markit Economics showed that activities in the US service sector accelerated more than market expectations for March. Positive sentiment for the US Dollar was also fuelled after the St. Louis Fed President, James Bullard opined that the outlook for the US economy remains “quite good” despite the batch of lacklustre US economic data released early in the year. Furthermore, he acknowledged a quicker-than-expected drop in the US jobless rate and projected the unemployment rate in the nation to fall below 6% by the end of this year.

Late yesterday, James Bullard in another conference at Hong Kong urged that the raising the inflation target for the US from 2% to 4% percent was not a good idea. He further stated that for the time being monetary policies were effective however he also cautioned that it is possible that they may be sub-optimal and therefore would lead to unnecessary global volatility.

The EUR continued to trade under pressure as investors continued to weigh whether the ECB policymakers’ may opt for additional monetary stimulus next week, in order to bolster the fragile economy. Further, the common currency dropped after an ECB Governing Council member, Luis Maria Linde indicated that the risk of deflation in the Euro-zone economy is low but not zero and the central bank would take necessary measures if needed.

Separately, data from the Euro-zone member nations showed that the Gfk consumer confidence in Germany came in at previous month’s level of 8.5 in April, broadly in-line with market estimates while consumer confidence in Italy jumped to a 3 years high reading of 101.7 in March. In addition, on a seasonally adjusted monthly basis, retail sales in Italy came in at a flat reading in January, falling short of market estimates for a 0.4% rise and compared to a 0.3% decline in the previous month.

In technical analysis, COZforex senior currency strategist Ian • Quigley said, EUR/USD is predicted to find support at 1.3767, and a drop through could take it to the next support line of 1.3748. Meanwhile, the pair is predicted to find its first resistance at 1.3815, and a rise through could take it to the next resistance line of 1.3844.

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