Michael Kopanakis  Head of Brokerage at ProbusFX
Michael Kopanakis Head of Brokerage at ProbusFX

Europe’s figures, sentiment and confidence seems to be high

After a good performance in 2017 and a solid start in 2018, I expect the momentum to be further sustained for the rest of 2018. The Eurozone could be looking forward to a great future after being quite stagnated for many years.

Europe’s figures, sentiment and confidence seems to be high

After a good performance in 2017 and a solid start in 2018, I expect the momentum to be further sustained for the rest of 2018. The Eurozone could be looking forward to a great future after being quite stagnated for many years. This positive future outlook on the Euro Zone is due to ECB president Mario Draghi, since he supports stimulating the Eurozone economies with quantitative easing as part of his monetary stimulus plan. Numbers do not lie, and they are the first indicators of what will follow. Making historic growth in more than a decade the GDP of the Eurozone has had its most rapid growth since 2007. GDP in 2017 was 2.5% while the rise in 2007 was 3.4%. Projections indicate that will most probably expand more within the next two years. During the last 12 months, from March 2017 to March 2018, the Euro Index has risen by 11 points, increasing from 86.11 to 96.11. Investment in the European Union is also strengthening because of the stronger demand and by the low financing costs, something that means that the “Juncker Plan” is still valid and on track to meet its target, which is to boost investments by 2018 to 315 Billion Euros. 

In a matter of 12 months the euro has increased by 21 cents on the dollar during a time of uncertainty for America before and after the presidential election of Donald Trump and monetary stimulus for the Eurozone. Taking a closer look at the weekly chart, we can clearly perceive the growth since the Euro rallied. This rally was paused by a bullish flag formation, which pushed price upwards again. Now we can see a consolidation of the price during the past 7 weeks and a possible bullish pennant formation. 

This consolidation can cause big movements, but first, the price will need to break either above the resistance zone of 1.2550-1.2570 in order to reach the next major resistance point of 1.2750 before trying to break the upper boundary of the channel (blue line) or break below the support zone of 1.2050-1.2000. A break below the mentioned support zone can be followed by the drop of the price close to the 1.15. A significant rise on the EUR against USD is not always predictable so we should expect some corrections of the main trend. Taking all of the above into account, the Euro and the Eurozone have been strengthening and will continue to do so as the economies within it continue to grow.