Accelerated QE and Soft Inflation Undermine Euro

eur-052015

The EUR/USD continues to trade under pressure after Tuesday’s ECB comments on a frontloading of QE bond purchases. The currency pair broke support at 1.1160-76 near the 20- and 100-day moving averages and is testing 1.11. Bond yields have moved lower which has allowed the differential between bunds and treasuries to move in the greenbacks favor.

In economic news, Eurozone construction output rebounded in March, although the rise of 0.8% month over month, hardly compensated for the -1.6% month over month contraction in February. The breakdown showed that the main impulse came from civil engineering, which was up 3.2% month over month. The annual rate rose to a still negative -2.7% year over year from -3.5% year over year.

German PPI slightly lower than expected. German April producer price inflation rose 0.1% month over month, which brought the annual rate up to -1.5% year over year from -1.7% year over year in the previous month, but still slightly below consensus of -1.4% year over year. PPI excluding energy rose to -0.3% year over year from -0.5% year over year.

Greece remains in the news putting pressure on the Euro. Moody’s said in a report that the outlook for the Greek banking system is negative, amid an acute deterioration in Greek banks’ funding and liquidity, with pressures unlikely to ease over the next 12-18 months. Banks will probably require additional capital over the outlook horizon and there is the likelihood of an imposition of capital controls and a deposit freeze, according to the report.

The technicals point to a test of the 50-day moving average near 1.0920. Momentum on the currency pair has turned negative as the MACD (moving average convergence divergence) index generated a sell signal. This occurs as the spread (the 12-day moving average minus the 26-day moving average) crosses below the 9-day moving average of the spread.

The post Accelerated QE and Soft Inflation Undermine Euro appeared first on Forex Circles.

Source:: Accelerated QE and Soft Inflation Undermine Euro

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