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#1 15-02-2021 13:56:34

johnedward
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From: Paris - France
Registered: 21-12-2009
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EUR/USD: a congestion phase near $1.2130

EUR/USD: a congestion phase near $1.2130


Today, with no markers from either China or the US due to holidays (New Year's Day and George's Birth Anniversary respectively), the EUR/USD spot remains stable, congested in a thin trading band slightly above $1.2100.

The Euro remains supported by the arrival of Mario Draghi as head of the Italian government. The former head of the ECB has "skilfully mixed technocrats and politicians, choosing competent figures in all the parties that have offered him their support, without however appealing to the leaders", according to BCG research.

Forex traders are digesting the downward revisions in wealth creation on this side of the Atlantic. According to Commission projections published last week, "overall GDP is now expected to grow by 3.7% in 2021 and 4.0% in 2022 in the EU and by 3.8% in both years in the eurozone. The EU economy is expected to reach pre-crisis output levels earlier than in the latest (so-called autumn) forecast, largely due to stronger momentum in the second half of 2021 and 2022. However, the speed of recovery will vary considerably across the EU. Some countries have suffered more during the pandemic than others, while others are more dependent on sectors such as tourism, which are likely to remain weak for some time. As a result, while some Member States are expected to see their economic output return to pre-pandemic levels by the end of 2021 or early 2022, others are expected to take longer". While naturally specifying that "these projections are subject to significant uncertainties and high risks, mainly related to the evolution of the pandemic and the success of the vaccine campaigns".

For CIC Market Solutions, "this scenario seems too optimistic because it assumes that health constraints will be eased from the second quarter, while the spread of new variants and the delay in vaccination will weigh on the situation between now and the summer".

The CIC division in charge of market activities backed up his comments: "If we maintain the hypothesis of an acceleration at the end of the year, the rebound in growth expected in 2021 should be less than 3% (i.e. lower than the Commission and the consensus). This is notably the case for France (growth of less than +4% in 2021 vs. +5.5% for the Commission), where we consider that a further tightening of restrictions cannot be ruled out in the face of the spread of variants (including those from Brazil and South Africa, which would represent between 4% and 5% of cases today) and the high tension in hospitals (the number of patients in intensive care is now at the level of the end of October, just before the second confinement). Overall, growth will only be able to accelerate from the second half of the year, in connection with the lifting of constraints and the deployment of European and national recovery plans, forcing the ECB to remain permanently present".

As far as statistics are concerned, last weekend there was little to be gained from the statistics. The "U-Mich" index in preliminary data came out at 76.2 for consumer confidence, in a surprise contraction.

In the immediate future, this morning, the bad surprise came from the industrial production figures in the Euro Zone for the month of December, in a more pronounced decline than expected from one month to the next (-1.6%). The statistical calendar will be fleshed out tomorrow with the ZEW on this side of the Atlantic and the Empire State manufacturing index on the other.

As of right now, the pair is trading at $1.2127.

KEY CHARTS
A rebalancing of forces in the very short term is taking place in the Euro Dollar currency pair, whose profile remains bearish below the 20-day moving average (in dark blue). The testing of this short term trend line is ongoing. Forex traders should avoid taking immediate positions until a more interesting chart entry point is found. A school doji star line on Wednesday materialised this temporary indecision. Neutral opinion reiterated this Friday.

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

We will maintain this neutral view as long as Euro Dollar (EUR/USD) rates are positioned between support at $1.2070 and resistance at $1.2210.

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