This week will be make or break time for the euro which is on the brink of staging a major recovery. Analysts believe that the euro - which has suffered a series of setbacks since its launch 17 months ago - may have finally turned the corner.
According to Dr Dan McLaughlin, chief economist at ABN-Amro, there is a possibility that the euro has turned. "From a technical point of view the evidence is very persuasive but we have had false dawns before and it is too early to say for sure," he said.
Technical analysts who examine graphs and charts for clues to a currency's direction believe that the euro may have hit a so-called "double bottom". This is generally seen as very good news and a sign that the currency is on the rise again. Double bottoms and double tops are frequently associated with major changes of direction for most financial markets.
Four weeks ago the euro hit $0.8850 and then hit this level again two weeks ago. If it now stays above $0.92 or even rises to the next key level at $0.95, this would be a turning point for the beleaguered currency.
The euro ended trading before the weekend at $0.9320 from a European close of $0.9089. A sustained recovery in the euro would be very good news for the Republic's authorities and would act as a brake on inflationary pressures as the price of imports would stop rising.
Trading in the currency is likely to be very light today with the US closed for the Memorial Day holiday and the London markets closed for a bank holiday.
However, attention will focus on key data due out of the US later in the week. The National Association of Purchasing Managers is due to report on Tuesday and Wednesday, while the nonfarms payrolls data will be released on Friday.
According to Dr McLaughlin all the figures will be closely examined for evidence that the US economy may be slowing.
Last Friday durable goods orders were very weak, showing the largest monthly fall since 1991. This may be an aberration or it could be the first real sign that the successive interest rate rises from the Fed are finally beginning to cool the economy.
Further weak figures would boost the euro as investors look more to the European Central Bank for further interest rate rises, albeit very gradually.
The euro may also continue to appreciate against sterling, although it has moved so quickly that a short-term bounce is likely. Over the last three weeks the pound has risen from around 72p against sterling to 79p as attention focused on the likely peak in the UK economy and the declining possibility of further rate rises.
