The euro’s rally to a six-month high after the trading bloc emerged from its longest-ever recession is set to reverse, trading patterns show, as the impact of the stronger economy is overwhelmed by the U.S. paring stimulus.
A measure known as the euro’s moving average convergence-divergence gauge fell below its signal line last week, with momentum turning negative after the currency climbed to $1.3452 on Aug. 20, data compiled by Bloomberg show. The euro surpassed the upper limit of its 20-day Bollinger band gauge, which also signals a turnaround.
While the euro area’s economy grew 0.3 percent from April to June, ending six straight quarters of contraction, economists surveyed by Bloomberg still see gross domestic product shrinking 0.6 percent this year, compared with a 1.6 percent expansion in the U.S. The European Central Bank’s plan to keep borrowing costs low while the Federal Reserve prepares to reduce stimulus will also weigh on the euro.
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