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The Euro Rises despite European Jawboning

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The Euro Rises despite European Jawboning

It was only a matter of time before some European official started to become concerned about the rising levels of the European currency. The French Industry Minister Montebourg advocated a 10% decline in the euro in a recent interview. An increasing Euro reduced the competitive nature of export led countries and will be a focus for European finance ministers. The question is how to achieve this weakness. The ECB seems to have pulled back their willingness to add more stimuli which is why the Euro is gaining ground against the dollar and the yen. With interest rate differentials favoring the euro it will be hard for Europe to talk down their currency.

The focus on housing prices and possible bubbles in some countries continue to grow. The Bundesbank has warned that apartment prices in Germany’s biggest cities could be overvalued by as much as 20%. In China, new home prices rose in 69 of the 70 cities, led by 20% increases in Shenzhen and Guangzhou. Prices rose 16% in Beijing and 17% in Shanghai. Meanwhile, data released yesterday showed that UK housing prices hit another record, with London prices rising a whopping 10% just in last month.

The Euro showed solid gains against the greenback, surging to resistance near the weekly highs at 1.3780. The next level of target resistance on the currency pair is seen near 1.4250. Support is seen near the 10-day moving average at 1.36.

Momentum on the currency pair is strong with the MACD (moving average convergence divergence) index generating a buy signal. This occurs when the spread (the 12-day moving average minus the 26-day moving average) crosses above the 9-day moving average of the spread. The only caveat to solid price action is the RSI print which is near 71, above the overbought trigger level of 70.

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