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#1 17-12-2020 13:39:46

johnedward
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From: Paris - France
Registered: 21-12-2009
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EUR/USD: the FED confirms the pair's rise

EUR/USD: the FED confirms the pair's rise


The EUR/USD currency pair validated the continuation of its bullish move with a contact with the resistance which was the target at 1.2230. The currency pair hit a new high of 1.2246 on Thursday.

On the EUR side: European and UK traders remain calm and this is a positive sign of progress. Both sides disagree on fisheries, a politically sensitive but secondary issue that could be resolved. The rise of the pound is pushing the EUR higher. The consensus is that an agreement should be reached, perhaps even at the last minute. If not, and the UK exits without an agreement this year, then an agreement would be likely in the pipeline next year. A Brexit without an agreement would inevitably have a negative impact on the eurozone. The "clearly positive" euro zone manufacturing and services data for December released on Wednesday validates the continuation of the bullish rally of the EUR/USD currency pair.

The virus continues to spread and has hit Italy among many others on the EU continent. European countries are announcing restrictions for the Christmas holidays instead of easing health measures during the holidays. Deaths, hospitalisations and cases in the United States remain on the rise. In addition, one person who received the Pfizer/BioNTech vaccine developed a severe allergic response. Other problems are possible.

On the USD side: The Federal Reserve refrained from adjusting its bond purchase programme, disappointing some investors who were expecting imminent action. Powell said Wednesday that there were significant deflationary pressures in the world and that inflation would be slow to rise above the 2% target. Not only is the Fed forecasting a slow rise in inflation, but it has also committed to keeping interest rates low for some time after inflation rises above 2%. In other words, rate hikes are unlikely to occur any time soon, even though markets are betting on a rapid global recovery with the availability of potential virus vaccines. As a result, the USD slumped following Powell's comments and is continuing its decline.

Washington lawmakers are moving toward signing a $895 billion package that Biden sees as a down payment before increasing spending next year. This encouraging news weighs on the USD. The winter wave is wreaking havoc on the economy. U.S. retail sales fell 1% last month, worse than expected and also in downward revision.

KEY CHART ELEMENTS
The short term trend remains bullish, and a continuation of the rise is validated by the contact with the resistance zone at 1.2229. A consolidation remains possible following this contact, a return to 1.2175 remains possible, but would not call into question the current upward trend. The currency pair is trading at levels not seen in 2 years. Should this resistance be broken, the next target would be a continuation towards 1.2398.

FORECAST
We retain our bullish opinion above 1.2175. Nevertheless a consolidation is possible before a continuation of the movement towards 1.2398.

MEDIUM TERM FORECAST
In view of the key chart factors we have mentioned, our opinion is positive in the medium term on the Euro Dollar (EUR/USD) exchange rate.

Our entry point is at $1.2180. Our target price for our bullish scenario is $1.2397. In order to preserve the capital employed, we advise you to position a protective stop at $1.2150.

The expected return on this forex strategy is 217 pips and the risk of loss is 30 pips.

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