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#1 26-04-2021 16:11:05

johnedward
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From: Paris - France
Registered: 21-12-2009
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EUR/USD: the euro regains some oxygen

EUR/USD: the euro regains some oxygen


The euro fully validated its breach of the upper limit of the bearish channel at the end of last week by accelerating upwards, with the support of a battery of activity barometers.

At the Eurozone level, the industrial PMI rose to 63.4, beating the target, and the services component broke through the 50-point barrier, which separates, by construction, a contraction from an expansion in the sector in question. Note the excellent performance of the German industrial component, at 66.4. These are the very first estimates for the current month.

This week, traders will be looking to the outcome of the FOMC on Wednesday. Like the ECB last week, the Fed is expected to take a cautious stance, without changing its monetary policy. According to Franck Dixmier (AllianzGI), "the Fed will continue to take a very pragmatic approach based on facts, not on expectations, as recently indicated by Richard Clarida, its vice-chairman. The Fed's action will be determined by usage and inflation figures. Thus, the US Federal Reserve is placing itself in a "reactive" rather than "proactive" mode, and is assuming a "behind the curve" position. However, it should remain particularly vigilant on inflation, as Powell recently repeated, saying that he was ready to take the necessary measures if inflation substantially exceeded 2% over an extended period."

Last week, the European Central Bank, as expected, confirmed its monetary support measures to the economy while the hoped-for rebound in activity is still pending. The president of the institution, Christine Lagarde, deemed on Thursday that it was "premature" to discuss a gradual end to the emergency monetary programme (PEPP) against the pandemic. Pessimistic about the short-term economic outlook, Christine Lagarde is nevertheless betting on "a firm rebound in activity" within the year thanks to vaccinations.

"Silence is golden and words are silver", this could be the summary of Sunday's meeting, according to John Plassard (Mirabaud). "Indeed, the ECB President chose not to give too much information that could suggest an upcoming move by the monetary institution. However, it is likely that the June meeting will be more difficult to "negotiate" in the face of the progress of the vaccination campaign and the rise in inflation..."

In the immediate future, currency traders have just taken note of a very slight increase, below expectations, in the IFO business climate index in Germany, the leading economic power in the Eurozone. However, the index is at its highest level since June 2019.

KEY CHART ELEMENTS
The crossing of the upper limit of a former bearish channel is now fully validated by the increase in volatility, particularly on Friday, and by the subsequent crossing, without any form of hesitation, of the 100-day moving average (in orange). However, a neutral opinion is proposed in the absence of a quality entry point.

MEDIUM-TERM FORECAST
Based on the key chart factors we have mentioned, our medium-term view on the Euro Dollar (EURUSD) is neutral.

We will maintain this neutral view as long as the EUR/USD is positioned between support at $1.1964 and resistance at $1.2100.

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