Home Fundamental Comment Euro pares advance despite end of eurozone deflation
Euro pares advance despite end of eurozone deflation

Euro pares advance despite end of eurozone deflation

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mainThe euro pared some of its earlier gains versus the U.S. dollar despite a report showing the 19-nation region has ended four months of deflation.

Consumer price index (CPI) for the euro area showed stagnation as in the year through April, coming in line with expectations, compared to 0.1 percent drop in March.

The data provides clues that risks of deflation are easing after the ECB introduced a massive 1.1 trillion euro quantitative-easing program.

Now, investors should have more confidence in the ECB policies and their ability to bolster recovery in the euro area.

Another report showed that euro area unemployment dropped in March by 36,000 to 18.1 million, yet the rate remained unchanged at 11.3 percent.

What About Greece?

Despite speculations that Greece would eventually exit the euro area as a series of deadlines are approaching, it seems that the Hellenic country is about to reach a deal with its creditors.

Greece could clinch a deal with its creditors in early May, Deputy Prime Minister Yannis Dragasakis said on Wednesday.

“Now we are going to a minimum agreement with actions that can be taken immediately. But [in the long-term] not just any solution will suffice. The solution has to be viable. After the interim agreement a long discussion about the debt, primary surpluses, investment and growth will follow,” Dragasakis revealed.

EURUSD

The upbeat data along with Dragasakis announcement should help the euro to resume it rebound.

However, the euro faced some downside pressure as it recorded a high of 1.1247 to trade around 1.1185.

The pair faced resistance as it approached 23.6 percent Fibo level for the downside trend that began in May 2014.

The Stochastic Oscillator momentum indicator points to a possible downside correction as the pair became overbought.43

 

Read the technical analysis for the bigger picture here

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Ahmed Mamdouh Ahmed Mamdouh, Co-Founder and Head of English Fundamental Analysis at FXComment.com, with 7 years of experience in the financial markets. Mamdouh holds a Master’s Degree in Economics from The American University in Cairo and a Bachelor Degree in Economics from The Faculty of Economics and Political Science, Cairo University.

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