Today we would take another look at the EUR/USD pair. Thanks to political problems in the United States and excellent data in the European Union, the euro in recent weeks managed to make up for most of its losses to the dollar and return to two-month highs around $1.19.
The future of the euro is very much dependent on those same factors. The stellar economic reports from the eurozone keep on coming. This week data on the PMI in the EU indicated the fastest growth in almost seven years. In addition, even though the euro was shaken by doubts in Germany where Angela Merkel failed to form a government, there is new hope in the talks about a coalition; that was able to undo the damage of the first negative news within a day. Today we expect an important release of information about the Consumer Price Index, which would give us a measurement of inflation: we expect it would have increased from 1.4% 1.6%. If that is the case, the euro will take off even more steadily.
Meanwhile, the dollar is failing to find strong grounds for strengthening, despite good economic reports. Currently the debate over tax reform is overshadowing any positive effects that might come from GDP growth and low unemployment rates. As the issue is still developing we expect the USD will continue to suffer in the foreseeable future.
Our overall outlook for the pair is bullish. We have a pivot point at 1.185 on the daily chart. We expect that the pair will move above it to touch the nearby resistances at 1.1883, 1.1916, or even 1.1983. If the pair drops below the pivot point, then look for the support levels at 1.1817 and 1.1784. The indicators of technical analysis agree on a strong buy signal.
