Euro Gains Over Confusion on Federal Reserve Rate Hike, Analysts Remain Sceptical

The EUR/USD rose considerably in the overnight trading session as disappointing US import-export data added further confusion to whether the Federal Reserve would hike interest rates later next week during its FOMC meeting. It is imperative to state that the euro came under selling pressure at the end of last week post comments from European Central Bank Chief Mario Draghi who said that the ECB was ready to introduce further easing if required to provide the much needed support to the fragile Eurozone economies which was seen as a huge negative. Traders would also turn their attention to the Greek elections scheduled for September 20th as political unrest in the Greek economy would be a huge negative for the euro.

Traders over the next week would be looking at a slew of economic reports coming out of the Chinese economy which would provide an insight into the extent of slowdown in the world’s second largest economy which is one of the largest trading partner for most of Europe. The FOMC meeting scheduled for next week would be closely watched as all eyes would be on the Federal Reserve with regards to its decision on short term interest rates and first steps towards normalization. The divergent policy stances adopted by the ECB and the Federal Reserve is seen as a huge negative for the euro in the near term.

When looking at the charts for the euro, the currency has been trading in a broad trading range but has been find resistance at higher levels which is being seen as a huge negative as it is indicative of the lack of buying interest. The relative strength index for the euro continues to form lower highs which is pointing towards the lack of inherent strength and is seen as a bearish sign.