The next five trading days are expected to put the Euro under more pressure especially with election uncertainties in Italy and Cyprus. The slow rate of growth in the Euro area is more bad news for the 17-nation currency as the European Central Bank will be keen to adopt a more dovish policy stance at its forthcoming meeting.
Already, the Federal Reserve’s minutes of the just concluded week revealed a more hawkish Central Bank looking to set out a timeline for an end to the current round of “QE-nfinity.”Investors are therefore switching to risk-off mode now that the Fed is assessing the costs of more asset purchases compared to its effectiveness and risks involved.
This move has further helped the dollar appreciate against the euro and will possibly squeeze it all the way to the 1.30 low of 2013.
In addition, last week’s comments from some of Europe’s policy makers can’t be ignored in forecasting the currency’s future rates.German’s Finance Minister said “the euro is stable” and that its current exchange rate is within acceptable range. Wolfgang Schaeuble during a discussion said, “We started with $1.17, now we're at $1.33, $1.35 - that's quite a good level.”
Elsewhere, German Chancellor Angela Merkel had also stated that from a historical perspective, the euro hovering between 1.30 and 1.40 is normal. No doubt, both range and breakout traders will be watching both levels for profitable positioning.
Technically, fibs plotted on the lows and highs of 2013 will give a good entry point after a complete retracement towards the 0.0 fib level.
Once Italy’s elections end on a good note, a long entry at the 1.30 area is more favoured with a stop at the next low of 1.2885. An exit at either 1.3437 or 1.3541 (i.e. 61.8 and 76.4 fib levels respectively) gives a good risk to reward ratio worth going for.
