Can A Dovish Policy Statement Help The Euro?
Today’s Spotlight Market
The Federal Reserve removed the word ?patient? from its policy statement, which is what market observers were expecting of the central bank.? However, in her press conference, Fed Chairwoman Janet Yellen, was very non-committal about the pace of tightening.? This has led to speculation that the Fed ?s timetable for raising interest rates may have been pushed back to a much later time than traders were expecting.? The Euro rallied sharply versus the dollar after the news.? Is this, however, enough to stabilize the battered currency?
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Fundamentals
The Federal Reserve delaying interest rates will likely be looked upon as favorable for the Euro from a rate standpoint.? However, the US central bank deciding to take a wait and see approach does not erase the underlying problems facing the European Union, including another Greek bailout, slow economic growth and deflationary pressure.? Quantitative Easing by the ECB should help alleviate the deflationary risks and could help usher in investment and growth, but the latest Greek crisis may hang over Europe like a black cloud.? Despite these difficulties facing Europe, there is an increasing vocal minority who believe the Euro currency may have been oversold and could rebound in the near-term.? The increasing spec short position in the Euro also suggests that the currency may be oversold.? There is roughly a 25% chance the Euro will finish the year below parity after starting the year at roughly a 5% chance.? ?
Technical Notes? -? View Today’s Chart
Turning to the chart, we see the June Euro holding around the 1.0500 at this time.? This can be seen as near-term support for the Euro and failure to hold here could result in the currency testing parity.? The Euro was extremely oversold before rebounding yesterday.? The RSI indicator registered single digit levels for several trading sessions.? For the Euro to recapture some near-term momentum, the June contract may need to break the 1.1275 level on the upside.
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