Euro Trading Fundamental Forecast – More Downside Expected?


The Euro drops to 1.22 at the start of the week on the back of Dollar’s sustained rally and there could be more to come! What factors might contribute to this? Find out as Analysts at ADS Securities shared their 24 April Euro Trading Fundamental Forecast.

24 April, ADS Securities – The Single currency has now lost almost 2% since last week’s 1.24 levels and the bearish momentum in place and upcoming key events point towards more losses in the short term. Yesterday the Eurozone PMIs generally beat expectations printing higher but this was not enough to counter Dollar’s rally in light of higher US Treasury yields.

24 April Euro Trading Fundamental Forecast – More Downside Expected?

The most important question though is what will happen over the next 72 hours with the Euro having to face two key challenges: today’s IFO reports from Germany and Thursday’s ECB meeting and press conference. Unfortunately for the Euro bulls, today’s data is predicted to come in softer with the business sentiment report reflecting uncertainty in Europe’s largest economy.

Furthermore, on Thursday Draghi is expected to employ the same cautious approach when discussing the need for tightening in the Euro area, a rhetoric that will offer no support to the weakening shared currency,

So the overall bias for the Euro is pointing lower and the key 1.2180 support is now put to the test. A break below this important technical level will trigger an immediate 100+ pips decline as the next area of support is found near the 1.2080 mark where the Euro was trading at the beginning of the year.

More Downside Expected?

To be fair, technical studies do suggest some exhaustion in Euro’s decline which combined with a potentially softer US Consumer Confidence report today might allow for some reprieve from more losses immediately.

However, this doesn’t sway us from our base scenario which suggests that the Euro is poised for more downside over the next few sessions. Depending on Draghi’s comments on Thursday and whether he reiterates that he sees no changes in policy in the immediate future the shared currency could end the week trading as low as the 1.19 floor.

Dollar’s momentum will also play its role in this scenario and even though a pullback from recent gains may be in the cards the overall bias for the greenback is positive which should add to Euro’s pains.

Asia Equities Markets

In the equities’ universe, stocks in Asia are trading strongly to the upside with the Hang Seng 1% higher and the Nikkei gaining 0.75% further underpinned by the declining Yen. The European and US futures are also trending higher as it seems that equity investors are not deterred by the rising yields and continue to focus on the positive earnings season.

However, with the spread between the 10-year US Treasuries and the S&P 500 dividend yield hitting a 5-year high another equities’ selloff might not be far away so we continue to employ a cautious approach on global stocks.

ADS Securities Risk Disclaimer

This article was provided by analysts of ADS Securities.

Trading foreign exchange, foreign exchange options, foreign exchange forwards, contracts for difference, bullion and other over-the-counter products carries a high level of risk. All opinions, news, analysis, prices or other information contained in this communication are provided as general market commentary. It does not constitute investment advice. Nor a solicitation or recommendation for you to buy or sell any over-the-counter product or another financial instrument.

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