Merkel could underpin the single currency in the beginning of this new week by criticizing its strength.
Germany which has been opposing the ECB's QE is now putting more pressure on the ECB, while the economy is improving the inflation is rising up in EU.
Merkel's comments show that it is not preferred to watch the inflation rising up further with no action from ECB which can be in a critical situation.
Her comments which have given reason why the German surplus is rising can be read also as an alarm, After the data have show last week that Germany HICP and CPI of April were up yearly by 2%.
Last December, The ECB has already lowered its QE pace of buying to be Eur 60b monthly, instead of Eur 80b by the end of March, but it has extended this buying program to be till the end of this year by this new pace.
Apr EU CPI was up yearly by 1.9% as the same as the ECB's yearly target which is close but below 2%, while Apr EU core CPI rose by only 1.2% y/y which is its highest rate since June 2013.
The ECB is still explaining the inflation rising up by referring to the energy prices year on year increasing which can be transitory.
WTI average was around $30 in the first quarter of 2016, while the average of the first quarter of this year is around $50 because of implementing OPEC cut deal which is expected to be extended to the end of the first quarter of next year, after this week meeting in Vienna.

From another side, the Fed's steps to raise the interest rate are still making the investment in EU much more attractive option because of the low cost of EUR borrowing comparing with US.
UST 2yr note yield which is sensitive to the interest rate outlook over the short term is now at 1.28%, while Ger 2yr bund yield is at -0.69% showing how the ECB muteness is adding to the interest rate outlook differential.

EURUSD has watched intermediate correction into this current ascending wave to 1.1075, before extending its rising to 1.1262 which has been reached earlier today.
EURUSD has previously made limited correction to 1.0838 on profit taking, after reaching 1.1020 following Macron's winning which dampened the political concerns in EU, while the political concerns in US are still rising.
EURUSD could succeed to keep existence above its daily SMA200 since its opening gap following the first round of the French elections
Before having this current rising up momentum, EURUSD could be underpinned by forming series of higher lows above 1.0339 which has been reached on the third day of this year to be the lowest level since December 2002.
EURUSD daily RSI-14 is referring now to existence inside the overbought region above 70 reading 72.509.
EURUSD daily Stochastic Oscillator (5, 3, 3) which is more sensitive to the volatility is still having its main line in the overbought region above 80 at 88.510 below its signal line which is at 90.236, but with no cutting leading to the downward yet.
EURUSD is in its fifth day of existence above its daily Parabolic SAR (step 0.02, maximum 0.2) which is reading today 1.0902.

Important levels: Daily SMA50 @ 1.0814, Daily SMA100 @ 1.0722 and Daily SMA200 @ 1.0792
S&R:
S1: 1.1075
S2: 1.0838
S3: 1.0681
R1: 1.1299
R2: 1.1366
R3: 1.1428

Have a good day




Have a good day

Kind Regards
Global Market Strategist
Walid Salah El din
E-mail: mail@fx-recommends.com