German inflation data last week came in better than expected and it fueled further the rally of the euro. Thanks to that the currency pair came close to 1.21, its previous high hit this summer. Next week more important data can affect the euro’s strength. The most important ones will be the German unemployment rate and the Eurozone inflation data. Purchasing manager indices from several EU countries and the US may also influence the future course of the euro. You can use the best forex robots to trade these events.
Differing monetary policies sent the euro/dollar rate down
The euro became undervalued compared to the dollar because of differing strategies of the FED and the ECB. While the FED had already started to tighten its monetary policy, the ECB just stepped on the path of loosening. Thanks to this, the dollar strengthened close to parity from around 1.4 against the euro. The European economy, however, has started to react to lower yields: both growth and inflation is rising. This makes a European interest rate hike more and more likely. According to our expectations this outlook will continue to prop up the euro in the new year. This is supported by the vast trade surplus of Germany and the trade deficit of the US which shows that the euro is undervalued against the dollar.
The robust growth of the European economy will help its currency
Given the favorable trends in the European economy and the still ultra-loose monetary policy of the ECB it is very likely that neither inflation nor unemployment data will disappoint. In case this expectation proves to be right the euro should rise above its previous peak of 1.21. This breakout opens a vast space to the upside.
How high the euro could go according to the best forex robots?
As mentioned before the euro/dollar rate was stable around the 1.4 level before the ECB started loosening monetary conditions. This level could be the ultimate long-term goal for the euro if the economic recovery continues. However, there are important levels along the way which will be important milestones for the euro and may trigger corrections on the way up. As you can see on the second chart, these key levels could be at 1.243 and then at 1.297 before finally arriving very close to the 1.4 level at 1.3855. The road there may be long and bumpy but the best forex robots help you to trade your way there while watching out for the news.