Will EUR/USD reach parity level?

Monday, Mar 28 2016

There were no data releases from Eurozone today. With markets closed this past Friday for the Easter holiday and many markets remaining closed for Easter Monday volume and volatility has been extremely light. Last week the shift in the attitude of the Federal Reserve speakers continues to dominate the currency markets. The US dollar remains well above the 96 level and the euro under the 1.12 price. The latest geopolitical and economic indicators suggest EUR/USD at $1.00 is coming. Growing rumors of the Fed preparing two more rate hikes in 2016 have all but made parity a certainty.

In fact, while Europe keeps being distracted by migration problems and increasing terrorism fears, economic sentiment in the United States is bullish, as shown by the latest data from the Fed published last week. The reaction to the attacks in Brussels shows that the euro has lost its appeal as a safe haven. The attacks coincided with the president of the Federal Reserve Bank of Atlanta, Dennis Lockhart, hinting that the Fed may raise interest rates in April.

It is unlikely that European growth or inflation will reach a high enough level to match the United States, thereby prompting a shift in the current quantitative easing trend favored by the European Central Bank. Euro to dollar exchange rate parity is a realistic expectation. Indeed, while the ECB will stimulate the flow of money, the U.S. Federal Reserve could increase rates again.

Euro is currently being traded few points below 1.1180 level. Pair is likely to find support around 1.11 handle and resistance above 1.12 level. Later today, in the US session, Existing Home Sales figures are scheduled for a release.

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