EURUSD Overview
German business climate study shows a slight improvement (96.8 vs. 96.6 prior) but didn’t meet the analyst expectations of 97.8. The increasing number of coronavirus infections and the problems with the supply of components in the industrial sector dragged the pace of recovery down in Germany. This is significant as the country is the biggest economy in the EU. However, the level of this composite index was the best since the pandemic low in April 2020. Today and tomorrow EURUSD traders focus on the ECB President Lagarde’s speech and the FOMC press conference. However, o change of policy is expected from the FOMC.

EURUSD rallied to our confluence zone at 1.2092 – 1.2130. The zone proved too hard to penetrate and some momentum was lost. There are several technical factors slowing the rally down. A swing high from March, a downsloping trendline and the 61.8% Fibonacci retracement level (measured from January high to March low) all coincide near the current market price. A key EURUSD support at 1.2060 (yesterday’s low) needs to hold in order for us to see a renewed attempt to the confluence zone. Yesterday’s candle shows signs of momentum loss though. Therefore, special attention should be paid to price action at support levels. We can see medium-term upside for EURUSD but the very recent price action indicates we could see a correction lower first. A decisive break below 1.1993 would indicate the uptrend is over. 

Currency Performance Charts
Over the last ten days, the EUR performance has been mixed. Euro has not been able to hold its ground against the commodity currencies AUD and NZD but has gained relative to CHF, GBP and JPY. Over the last two days, the EUR has gained momentum against the JPY but lost some against the USD. The two-day performance has also been weak against the commodity currencies. Percentage values in the above charts are recorded at the time of writing this report and remain subject to change. Note that some of the currency pairs have been inverted to highlight the performance of the EUR against its peers.

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Market News & Facts

  • BOJ maintained the monetary policy unchanged. No reaction in JPY pairs.
  • US stocks moved to new all-time highs.
  • Vaccination rate very ‘healthy’ in the US but lags elsewhere.
  • India suffering from high rates of infections and deaths

TOP FX Movers
CAD has moved strongly higher against JPY and GBP but has been strong across the board. The Canadian dollar has been strong due to the BOC decreasing its bond-buying program by $1 billion (25%). We said in our analysis (here) that the currency would benefit from this massive cut in asset purchases. Such a strong policy change from the BOC is likely to continue to have an impact on the CAD pairs for some time as it takes time for the markets to adjust to the new policy

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The Next Main Risk Events

  • USD CB Consumer Confidence
  • CAD BOC Gov Macklem’s Speech
  • AUD Consumer Price Index (q/q)
  • OIL OPEC JMMC Meeting
  • CAD Retail Sales
  • EUR ECB President Lagarde’s Speech
  • OIL WTI Crude Inventories
  • USD FOMC Statement
  • USD FOMC Press Conference

For more information see the TIOmarkets economic calendar here.

Trade Safe!

Janne Muta
Chief Market Analyst

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Janne Muta

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