The Euro gained traction against the greenback ahead of Draghi’s comments on Thursday. The head of the European central bank is scheduled to give testimony in front of the European parliament similar to his counterpart Janet Yellen who continues her two day Humphrey Hawkins testimony.
Fed boss Yellen indicated on Tuesday again that the Fed will remain patient for now and Draghi will likely follow this up with dovish comments as he justifies the decision to move towards full blown QE and sovereign bond purchases. Data releases out of the Eurozone may be strong, but the start of the central bank’s QE program will likely set the EUR/USD up for continued declines.
French consumer confidence came in higher than expected at 92, up from 90 in the previous month. This ties in with improvements in the overall Eurozone reading and confirms that falling oil prices, which are lifting real disposable income, coupled with somewhat more upbeat news on the Eurozone economic outlook and stabilizing labor markets, are lifting sentiment. The French economy is likely to continue to underperform, not due to enforced austerity measures as the government likes to claim, but the lack of structural reforms and no amount of deficit spending will change that.
Germany sold 5-year bonds at negative yield. Germany sold EUR 3.28 billion of 5-year Bobls with a coupon of 0.00%, at an average yield of -0.08%, down from 0.04% at the previous auction and the first time that a 5-year bond was sold with a negative yield. Despite this demand was high ahead of the ECB’s bond purchase program.
The EUR/USD remains in a tight range that has perpetuated for most of 2015. Resistance is seen near 1.15, while support is seen at 1.1250. Momentum has flattened and the relative strength index is printing a reading of 43, which is in the middle of the neutral range.