Dmitri Lysenko
They say the eurozone is gradually coming out of the continued crisis and economic recession. More and more analysts seem to be changing their 5-year habit of giving gloomy prediction and doomsday scenarios when it comes to the eurozone and its common currency.
Still the sudden optimism looks unconvincing since there have been no major economic changes in the eurozone. Where does this optimist come from? Let’s try to answer this question together…
Recession Over?
According to mass media, the gap between the German bond yields and the bond yields of Italy and Spain has narrowed down to the minimal level in 2 years. This forced The WSJ to think that the eurozone recession is about to be over. The experts assume that the closest eurozone GDP report will indicate an exit from the GDP decline, which has been seem over the last 18 months. The industrial production figures seem to be reassuring as well. Still, some experts do not share this excessive optimism.
Skeptics say the recession is still underway and is far from being over. There is not clear tendency to be so optimistic about the eurozone’s near-term prospects. On top of that, the Fed may stil change its mind and delay the tampering of its accommodative policy due to some confrontation seen between Obama’s administration and the Republican part of the Congress. If there is no tapering in late 2013, the probability of a US default will increase along with higher tensions concerning the US debt ceiling issue. If this is the case, the eurozone will definitely feel the consequences.
On top of that the Greek problem hasn’t gone anywhere. It still needs urgent solution on top giving Greece endless tranches and writing down debts. Apart from Greece, there are Cyprus and Portugal , not to mention Italy and Spain with its minor progress in solving local financial issues, which cannot drastically improve the overall situation in the eurozone.
Forex
The chart below, courtesy of Masterforex-V Academy, reflects the current state of affairs in the market of EURUSD. The currency pair is still developing a mid-term rally. The closest levels of resistance are 1,3399 and the area around 1,3416. At the same time, the closest level of support is 1,3205.
Dmitri Lysenko
