Following on from Last weeks Overview Eur/usd overview (17th Feb) .
Bulls remain in command of the market, driving towards the 138 handle .
The only concern for Bulls now Remains that Hope will spring into the bearish camp if equity markets continue to weaken. A ‘risk-off’ asset move will likely see a flood of investors seeking safety in the Dollar which might give sellers the right stimulus to counter the current uptrend.
However Momentum continues to build in favour of the uptrend, A key test will be the break of 1.3856, which mark the annual highs. A break here could open the floodgates towards the 1.4000 handle; a level easily achievable especially with recent ECB inflation concerns.
There is potential that the ECB could raise rates before September this year. With inflationary pressures mounting as a result of increasing energy and food prices, it will only be a slight delay before wages rise to compensate, thus making a rate hike essential. But a hike would increase the borrowing pressure on EU countries – particularly peripheral nations – and could stress an already troubled banking system which would exacerbate the sovereign debt crisis.
Freshley Squeezed view
Will carefully watch out for any further comments from the ECB, which may hint at future monetary policy action – strategy continues to be to buy dips in the market with a strong positive impetus looking likely to test large daily resistance at 1.3856.