Today we shall take a look at the EUR/USD currency pair. Last week the pair made a modest recovery for a few days but then ended the week on a negative note again. Today we find it trading near levels from the beginning of March around 1.19.
The European Central Bank last week delivered mixed signals after its monthly policy meeting on Thursday. The regulator did not touch interest rates, which was expected. However, it also did not step up its bond purchases, which many market participants were getting ready for. Instead, ECB President Lagarde stated that the bank might increase bond purchases in Q2 if the economic conditions necessitate it, but would otherwise refrain from trying to directly manipulate bond yields, despite a concern for their sharp increase over the past month or so. As a result, for now European bond yields (together with their international counterparts) will keep rising, which in turn will offer support to the euro. Aside from this, fundamental reports this week will likely not affect the euro all that much. The only one of interest will be tomorrow’s economic sentiment report from Germany, where growth is expected.
As for the US dollar, some of the above-mentioned factors apply to it as well. Bond yields are rising in the United States as well, as the country seems to be ahead of everyone else in terms of overcoming the coronavirus pandemic and the economic crisis it brought about. With higher yields and the prospect of a speedy recovery, further boosted by the final approval of Biden’s stimulus bill a few days ago and the arrival of stimulus checks, the dollar is well-positioned for further growth. The most critical development for the dollar this week will be Wednesday’s policy meeting of the Federal Reserve. The regulator may change its tone about monetary policy thanks to the stimulus bill and improving labor data, though so far the Fed has been firm and consistent in its tone. Even the slightest suggestion of hawkishness could boost the dollar further.
In terms of the daily chart, today we have a pivot point for the pair located at 1.1949, with the price currently trading below it. The daily support levels lie at 1.1944 and 1.1939, both overcome. The daily resistances are located at 1.1954 and 1.1959. The indicators of technical analysis agree in strongly recommending a sell position today.
