Better Prospects for the Euro

As expected last week, the dollar has been losing ground in view of the statements of Fed members, who are mostly more favorable to maintain QE policies as long as needed.

And the final confirmation has come this afternoon in Bernanke's appearance:

“A premature tightening of monetary policy could lead interest rates to rise temporarily, but also would carry a substantial risk of slowing or ending the economic recovery.”

I think that the dollar should further correct and the EUR/USD may again exceed the critical level of 1,30. We will see a technique confirmation if the dollar index closes below 83,40.

In addition, in Europe the peripheral risk premiums remain fairly stable, and they are likely to improve, especially after the publication of new data about the current account deficit of the eurozone in March, which has improved substantially over the previous month's figure. A sustained surplus will undoubtedly enhance the credibility of public finances and also for the bonds of the countries concerned. On the negative side, I see that these improvements are based largely on the decline in imports, but the ultimate effect, referring to foreign debt, remains favorable.

For this reason, the EUR/USD is likely to resist its downtrend rally and it can be kept above the level of 1,30. The USD/JPY could also correct its price, so we must be careful with the 102,00 and 101,80 levels, whose break would open new extensions to downward trend.