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#1 27-04-2021 14:21:56

johnedward
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From: Paris - France
Registered: 21-12-2009
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EUR/USD: GAFA quarterly reports and US monetary policy on the menu

EUR/USD: GAFA quarterly reports and US monetary policy on the menu


After a fully validated channel exit, the Euro/Dollar went "sideways" a bit at the beginning of the week, in the run-up to high-stakes monetary and microeconomic meetings: the FOMC meeting (today), and the GAFA reports to be released throughout the week:

1) The Fed should adopt 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 the employment 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 Jerome Powell recently reiterated, saying that he was ready to take the necessary measures if inflation substantially exceeded 2% over a prolonged period."

2) To be continued, after Tesla and AMD on Monday, Microsoft and Alphabet on Tuesday, Apple, Facebook and Qualcomm today and Amazon on Thursday... "Investor expectations are high, especially for US companies, whose valuations have reached record highs. Results that are too low, as seen at Netflix last week, could lead investors to question the relevance of such a valuation and lead to a correction on certain assets. In addition, the outlook will be carefully monitored to judge the strength of the upcoming economic recovery," warns Vincent Boy (IG France).

Finally, the US tax issue will remain under scrutiny. After his plan to increase the corporate tax to partly finance his ambitious and "historic" infrastructure plan, Joe Biden announced that he wanted to increase the last income tax bracket, almost doubling it above one million dollars in annual income. "It's very likely that the reform will pass, even if it's scrapped by Congress. The US government is not the only one looking for new sources of funding: other governments that came to the rescue of the private sector during the pandemic will follow suit." says CÚsar Ruiz, Head of Investments and CIO at Pictet Wealth Management.

On the statistical front, traders saw a very slight increase, below expectations, in the IFO business climate index for Germany, the Eurozone's leading economic power. However, the index is at its highest level since June 2019. A clear disappointment concerning durable goods orders for March (+0.5%), which fell far short of expectations. Excluding transport equipment (+1.6%), the dynamic remains in line with expectations.

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 of the 100-day moving average (in orange) without any hesitation. However, a neutral opinion is proposed in the absence of a quality chart entry point. Especially as we are currently below a thin resistance level at $1.2100.

MEDIUM-TERM FORECAST

Given 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 Euro Dollar (EURUSD) prices are positioned between support at $1.1964 and resistance at $1.2100.

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