Current trend
Following the highs at the level of 1.3915 the Unified European currency has corrected and is now trading at the level of 1.3870. Breakdown of the level of 1.4000 will give a chance for further upward movement up to 1.4200. However, we believe that this scenario is unlikely as EU economy demonstrates slow pace of recovery.
In France volume of industrial output fell by 0.1% in January, however on annual basis this level reached the level of 5% against the forecast of 3.9%. Experts believe that the rise can be suspended due to low demand in the domestic market and relatively expensive Euro, which negatively affect competiveness of the local products produced for exports.
Investors were not encouraged by the IMF report that highlighted the increase of deflation risks in EU. According to the latest data, inflation rate in the countries of Eurozone amounted to 0.8%, while the target level of inflation stated by ECB is 2%. If low rate of inflation preserves, it can aggravate a problem of public debts in the troubled countries of Eurozone and have a negative impact on total economic recovery.
Today, the data on volume of German exports will become known. According to preliminary estimates it can reach 1.4%, which can support Euro.
Levels of support and resistance
The nearest resistance level is 1.3915 – the upper limit of the trading channel.
Support level is 1.3822 – bottom limit of the trading channel.
Trading tips
It is recommended to open short positions after breakdown of the level of 1.3822 with stop-loss at 1.3840 and a target of 1.3760.
Dmitry Agurbash
Analysts of LiteForex Group of Companies
