The euro bounced off its lows of 1.1817 to end the day in positive territory. The latest economic reports were mixed with German consumer prices rising in November, Eurozone business confidence ticking upwards but industrial and services confidence fell short of expectations. Even so, all of these represented improvements in the Eurozone economy.
The latest comments from ECB officials were also relatively positive with Bundesbank President Weidmann saying the central bank’s growth outlook could be raised given strong data. He also expressed his skepticism over the need for QE. Vice President Constancio felt that the euro area is much more resilient to possible shocks. German retail sales and labor market numbers are due for release on Thursday. Given the sharp rise in the employment component of the PMIs, we believe tomorrow’s report will show a material improvement in labor market conditions. If we are right, EUR/USD could squeeze up to 1.19.
Technically, the EUR/USD has found support above the 100 and 50-day SMA. It is too early to tell whether 1.1817 marks a bottom because there’s still scope for a move back to 1.1750/60 but if EZ data is good, we could see a rally above 1.19.
