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#1 14-09-2020 11:38:18

johnedward
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From: Paris - France
Registered: 21-12-2009
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EUR/USD: danger if the $1,1745 level is broken through

EUR/USD: danger if the $1,1745 level is broken through


In the absence of any new sharp items, traders continue to digest the latest news on the European monetary front. The ECB, which was wrapping up a Governing Council meeting on Thursday, is not overly alarmed by the euro's appreciation (see below): it didn't take much to get the single currency back on track, even within a long history of lateralisation.

The European Central Bank has not changed its policy, nor has it given any major strategic orientations for the coming months, as the Fed did in the preamble to the last Jackson Hole symposium.

Emmanuel Auboyneau, Amplegest's Managing Partner, says: "We were expecting the ECB President on the eurodollar exchange rate after the strong rise of the European currency this summer. She confirmed that this subject was indeed on the agenda of the ECB's reflections, while pointing out that one should not overreact and that this issue was not part of the bank's stated missions. However, as the rise of the euro contributes to the current disinflationary movement, the Central Bank can only be concerned about it. The eurodollar parity is therefore under surveillance, without further precision. Not sure that these statements can act in the direction of a retreat of the euro against the U.S. currency?"

However, Mrs. Lagarde was reassuring when she declared that "deflationary risks are on the decline". For Carsten Brzeski, chief economist at ING, the head of the institution is engaged in an "interesting, even risky verbal balancing act". "Mentioning the exchange rate in her introductory statement for the first time in more than 3 years and insisting on upward revisions to (core) inflation forecasts could eventually trigger a further strengthening of the euro," he writes. Which, he says, "means that the ECB seems to be worried about the euro's appreciation, but not too much yet".

John Placard (Mirabaud) says: "Improving economic prospects or the euro's level considered "reasonable", Christine Lagarde paints a picture of the euro zone with certainly uncertainties, but a return of confidence. All that was needed for investors to get back on track, just like the euro. Doubts about further monetary intervention could thus resurface and spoil the party somewhat".

In Friday's statistical chapter, Germany's consumer price index for last month in final data came out at -0.05%, right on target, according to DeStatis data. On the other side of the Atlantic, consumer price figures were also released by the Bureau of Labor Statistics. Regardless of the product base selected, monthly price dynamics for last month exceeded expectations (+0.5%).

For the time being, the main figure of the day has just been released: industrial production in the Euro Zone, which grew in July at a monthly rate of 4.0%, slightly above expectations after a jump of 9.6% in June, post-confinement.

As for the USD, it remains thwarted by the failures in Congress on the negotiation between Republicans and Democrats of a new aid plan of $500 billion.

By mid-day on the foreign exchange market, the Euro was trading at around $1.1867.

MEDIUM-TERM FORECAST

Our opinion is neutral in the medium term on the pair.

We will maintain this neutral opinion as long as the pair is positioned between support at $1.1745 and resistance at $1.2000.

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