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#1 11-01-2022 09:04:16

johnedward
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From: Paris - France
Registered: 21-12-2009
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EUR/USD: powerful antagonistic forces are in place

EUR/USD: powerful antagonistic forces are in place


The energizing effect of 10-year Treasuries on the dollar continued to oppose another antagonistic force on the currency pair: relief, at this stage, on the level of "danger" of Omicron. Especially since the risk it represents "seems limited by the experience of governments and the effectiveness of vaccines," reads a macroeconomic note on the Eurozone from Indosuez Wealth Management. The team of economists confirms a "high growth scenario - above potential, but down from 2021 - for this year. At the same time, inflation - which is mainly driven by rising energy prices - could peak in the coming months before returning to more normal levels, while remaining above the 2% threshold."

Released on Friday morning, inflation figures in the Eurozone came out higher than expected, at +2.5% in the first estimates for December, at an annualised rate, excluding food, energy, alcohol and tobacco (volatile items). A price increase that reaches the symbolic threshold of 5% if we include these items in the basket...

Statistical highlight on Friday, the private sector (excluding agriculture) created a little less than 199,000 jobs in December, far, far from expectations. On the other hand, the unemployment rate for its part continues to fall, passing under the 4% mark of the active population. In terms of private employment, the NFP highlights the continuing upward trend in leisure and hospitality, professional and business services, manufacturing, construction, transport and logistics warehouses. The question now is how the market will interpret this in terms of tightness in the labour market. Tensions that were the focus of the Minutes released earlier in the week.

These events have combined to significantly increase the yields on long-term government bonds in the United States. They were down slightly this morning, but still hovered between 1.76 and 1.77.

Yesterday morning, good news to report on the Sentix index of business confidence in the Euro Zone, which beat expectations by approaching 15 points. The unemployment rate in the Euro Zone is still falling as expected, to 7.3% of the active population, the lowest since July 2008.

No important US figures are on the agenda today. The next major event, and one with a strong potential impact on the spot, is the Consumer Price Index inflation report tomorrow.

Right now, the pair is trading at $1.1349.

KEY CHART ELEMENTS

For the time being, the pair is still in a wedge-shaped consolidation pattern, which is part of a powerful bearish bottom dynamic. The configuration remains heavy, but we warn against the temptation of an early return to bearish positions, the "risk" of a false exit through the top, in the very short term, being present. We are still waiting for a much better entry point. So beware of the action bias.

MEDIUM TERM FORECAST

Given the key chart factors we have mentioned, our medium-term view on the EUR/USD is neutral.

We will maintain this neutral view as long as the EUR/USD is positioned between support at $1.1216 and resistance at $1.1360.

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