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#1 18-01-2021 13:18:06

Admin & Trader
From: Paris - France
Registered: 21-12-2009
Posts: 3068

EUR/USD: an inflexion is indeed confirmed

EUR/USD: an inflexion is indeed confirmed

The Euro further validated its bearish inflection against the Dollar as restrictive measures in the Euro Zone multiply to counter the effects of the virus situation, and as traders realise that the arrival of vaccines does not resolve the health situation with a snap of the fingers. The recent issue of vaccine logistics, in particular with Pfizer's delays in delivery, have illustrated this.

Generally speaking, the World Health Organisation (WHO) has announced at this stage that it does not anticipate collective immunity before the end of the year despite the arrival of the vaccines. At last week's Reuters Next conference, Christine Lagarde, President of the ECB, said that the Eurozone's rebound forecasts unveiled last month remain valid provided that the restrictive measures are lifted by the end of the first quarter. But it is indeed this whole question that is pending.

After Portugal, which since the end of last week is again in confinement for a month, and France, which has generalised a harsh and un-neccessary 6 p.m. curfew throughout the country, it is Italy's turn to raise its level of restrictions in three regions, particularly in Lombardy, a highly industrialised region.

Political issues in Europe are attracting the attention of traders, with a reassuring note in Germany and a worrying one in Italy.

Moderate Armin Laschet has been elected as leader of the CDU, the party of Mrs Merkel, who is completing her fourth term as Chancellor in the spring. "This is clearly in line with Angela Merkel, which reduces fears of having a conservative candidate quick to question budgetary support or European solidarity after the October parliamentary elections (an element in favour of the single currency)," according to CIC Market Solutions.

The return of the spectre of political instability in Italy weighs on the single currency, "just at a time when the Parliament is due to give its approval for a larger than expected public deficit for 2021, more than 30 billion euros more", notes Sebastian Paris Horvitz (LBPAM).

On the American political side, the elected President of the United States, who is due to take office on Wednesday, has unveiled a package worth a total of $1,900 billion, including 415 billion intended to reinforce the fight and vaccination against the virus, about 1,000 billion in direct aid to households and 440 billion for small businesses. The question of the consequences in terms of inflation of this plan (10% of the GDP!), just like the continuation of the pandemic, should weigh on the offensive character of the initiatives, at the approach, moreover, of the beginning of the ball of the annual results of large American groups.

In statistical terms, the figures came out so-so on Friday: retail sales, adjusted for automobiles, fell by 1.3% in December at a monthly rate, missing the target, and producer prices, by only 0.2% over the same period, were also a disappointment. The New York Fed's manufacturing index (Empire State Manufacturing Index), contracted to 3.5, down from 4.9 last month, and an optimistic consensus at 5.7. The December federal monthly report on industry, on the other hand, was pleasantly surprising, with targets clearly beaten, both on production itself (+1.7%) and on the production capacity utilization rate (74.6%). On the European side, a good surprise concerning the trade surplus of November which remained almost stable compared to October, beyond the 25 billion, clearly above the median expectations.

As of right now, the pair is trading at $1.2063.

This now validated break from the 20-day moving average (in dark blue) changes the technical framework that had prevailed until then. After more than two months of uninterrupted firm growth, the time is ripe for a downturn under the aforementioned short-term trend curve, which has now sharply reduced its downward slope. Last weekend, we specified two technically identifiable support points: $1,2116 and $1,2000. The first of these has been erased on a bout of volatility, which leads us to anticipate a break of the second one.

In view of the key graphical factors we have mentioned, our opinion is negative over the medium term on the Euro Dollar (EURUSD) exchange rate.

"Anything worth having is worth going for - all the way." - J.R. Ewing



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