On Friday, I laid out price action that could suggest a weak euro in the short term. Today, Kathy Lien laid out the fundamentals that could shift market sentiment euro bearish.
… investors look to economic data and the European Commission’s forecasts for clues on whether the 5% decline in stocks and sharp contraction in Q4 GDP growth means that euro’s problems have returned.
The decline in Eurozone GDP growth in the fourth quarter raised concerns that the complete lack of growth last year and the prospect of a flat first quarter will make budget deficits in the region even more unsustainable.
Germany has been carrying the Eurozone on her shoulders and this week we learn whether she continues to do so vis a vis the IFO and PMI reports. If economic activity in Germany continues to surprise to the upside, the euro could find support but if there are any downside surprises, the currency could tumble quickly.
This week could be epic for euro or just a non-event. Either way, the holiday-shortened week has already been volatile and choppy for euro positions. The $EURGBP has already tested higher to 0.8650 as 0.8600 holds. So the euro is trying to keep the party going. Time will tell.
Read Kathy’s entire piece, Have the Euros Troubles Returned?