The euro is stronger versus both the dollar and in the crosses as Thursday’s EU summit approaches. Traders may be looking for a “buy the rumor, sell the fact” type scenario with the euro. The kiwi is now trading at a 30-year high versus the dollar on better terms of trade and growth expectations.
Yesterday’s failure of the EUR/USD to breach below the 1.4000 level has helped the euro rebound during today’s European trading session. A softening of the ECBs position against a default was perhaps hinted at by Ewald Nowotny, the governor of the Austrian Central Bank and a member of the ECB governing council. Nowotny said a “selective default” by Greece might not have “major negative consequences”. The euro later reached an intraday high at 1.4216 following mixed ZEW surveys. The German ZEW Economic Sentient survey shows analysts and investors are more pessimistic going forward. This hints at economic weakness in the euro zone for the second half of the year.
Multiple options are being considered for a second Greek bailout package and these will be debated on Thursday as the European elite are scheduled to meet in Brussels. The split between the ECB and Germany remains the biggest roadblock to any deal. Any gains in the EUR/USD may make for a selling opportunity. A breach of today’s intraday high at 1.4220 would likely test the resistance from last week’s high and the 200-day moving average at 1.4290.
The kiwi has jumped out to a 30-year high versus the USD. The New Zealand dollar has performed particularly well as a rising trade surplus and increasing GDP has boosted the commodity currency. Rising inflationary forces may also force the RBNZ to raise interest rates sooner than expected. The NZD/USD is up 19.5% since reaching a low in mid-March. In comparison, the AUD/USD is only up 10% over the same period.
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