18, June 2013

EUR/USD (a 4-hour chart)

Euro ended the last week higher against the U.S. dollar than the previous one. However, there was a significant intraday correction the last few days of the week when the pair reached some key resistance levels. All that suggests that its further progress will depend on the outcome of the FOMC rate and Eurozone PMI index data. When ECB President Draghi last spoke, he expressed optimism about the prospects for the euro zone. If the manufacturing and services sector activity increase, as it is expected, we believe the pair can reach new high levels soon. Still if the data surprises us with negative results we can see the currency again at 1.32.

We also wait for German study ZEW release, the conference on the economy in Brussels and the meeting of eurozone finance ministers in Luxembourg.

Meanwhile, in an interview, Chancellor Angela Merkel acknowledged the concerns of the investment community about the tax on financial transactions and said that she would keep in mind the problems in the development of tax laws.

There are fears that the tax law will impact pension and send the economy into a deep recession. Merkel said: "We are aware of the fact that this tax is not used in the world, and it should be an individual type of tax. It would obviously be very bad for the some layers of the population, that's why we should do everything right".

The European Central Bank (member Christian Noyer), said last month in Paris that the proposed tax does not generate any revenue as it can damage the market. Noyer said the tax "or it will destroy the financial sector" or create the conditions in which the "cost of borrowing in the real sector of the economy will be increased for everyone."