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#1 22-02-2021 13:53:23

johnedward
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From: Paris - France
Registered: 21-12-2009
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EUR/USD: antagonistic forces are at work

EUR/USD: antagonistic forces are at work


The EUR/USD continued its erratic oscillations around $1.21, the spot being subject to headwinds amidst notable improvements in health on both sides of the Atlantic and fears of a too rapid rise in prices.

Does this future inflationary "push" worry the Fed? "Not as things stand", according to Vontobel AM research. "In fact, it is likely that it will welcome it to some extent since the increase in inflation forecasts will support its objectives. In view of the number of jobs to be recreated, it doesn't intend to take an immediate look at its monetary policy, but the job creation curve will have to be carefully monitored".

The latest monthly federal NFP report on employment clearly showed this.

"The Fed's areas of vigilance lie more in the pace at which the interest rate markets are moving. Rising treasury bill yields are not a bad thing in themselves. From a bond investor's point of view, it's even a very positive sign, and it will help us to adopt a more balanced positioning in the future. However, if sovereign yields continue to rise, this could lead to a tightening of financial conditions and a fall in bond prices, which could spill over to other asset classes".

On this side of the Atlantic, according to CIC Market Solutions Research, "the ECB notes a less buoyant environment in the short term, especially with the new variants, but better oriented in the medium term amidst a healthier, recovering and more favourable international context. Since this meeting, the significant reduction in contamination has reinforced the idea of a major rebound, which will nevertheless take several months to materialise".

In last Friday's statistics, forex traders took note of the very first estimates of activity barometer indicators for the current month. For the Euro zone as a whole, the "PMI Services" came out at 44.8, but it is on the industry side that the surprise is particularly pleasant (57.8, significantly above the consensus), thanks in particular to the German component, above 59. As a reminder, a score above 49 points means an expansion of the sector under consideration. No surprise on the other side of the Atlantic with a manufacturing PMI flash at 58.4, firm.

As of right now, the pair is trading at $1.2104.

KEY CHART ELEMENTS
Exceeding the 20-day moving average (in dark blue) invites us to take a "time out". The inscription of a significant high wick (shadow) on the candle of the day would, if necessary, change the situation, but we are not there yet. Neutral advice for the immediate future: active traders should therefore avoid taking a stand until a suitable entry point is found.

MEDIUM-TERM FORECAST
In view of the key chart factors we have mentioned, our opinion is neutral in the medium term on the pair's exchange rate.

We will maintain this neutral view as long as Euro Dollar (EURUSD) rates are positioned between support at $1.2099and resistance at $1.2210.

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