EUR / USD: The Dollar keeps the advantage after a key week

(News Bulletin 247) – In a very nervous foreign exchange market, the Euro / Dollar currency pair remained compressed within a wedge (wedge) centered around $ 1.13, with the outgoing dollar “winning” in the last major monetary policy meetings this year, for the Fed and the ECB, and the euro remaining, as a barometer of risk appetite, under the pressure of the propagation of the Omicron variant. And this while in the Netherlands, a new confinement has been decreed, and in Denmark, new restrictions, in the form of gauge in restaurants and shops, have been restored.

In the monetary chapter last week, it was therefore the turn of the ECB, after the Fed on Wednesday, to pass on the grill, by completing a Board of Governors. The monetary institution headed by Christine Lagarde indicated that it was keeping its key rates unchanged while announcing a gradual reduction in the pace of asset repurchases: net purchases of debt as part of its emergency purchase program against the pandemic (PEPP), with 1.850 billion euros, will be further reduced in the first quarter of 2022 and will expire as planned at the end of March.

As a reminder, the Fed paved the way for monetary normalization, by laying out the path a little more clearly. It plans to stop the bond buyback program in March, and a three-quarter point increase in its rates, in three times, over the coming year. And this with the aim of fighting against inflation that is no longer temporary. Associated with the new economic projections, this strategic commitment of the Fed was not considered more “hawkish” than expected. It must be said that this turn (not too tight) was anticipated.

Matthieu Bailly, Deputy CEO and OCTO AM bond manager reaffirms the prospect of a “widening of the spread between American rates and European rates: all the economic, financial and monetary factors militate for a much higher rate hike in the United States than in the Eurozone, as had already happened during the 2010 decade. This widening could continue the strengthening trend of the dollar“.

If she regains a few pips this Monday, the single currency took the hit Friday after the publication of a German indicator of bad bill. The IFO business climate index in the Eurozone’s largest economy fell from 96.6 points in October to 94.7 points. “Companies were less satisfied with their current situation and expectations have become more pessimistic. Supply bottlenecks and the fourth wave of the coronavirus challenge German companies,” the publication read. IFO.

To follow this Monday the index of leading indicators (Conference Board) at 4:00 p.m.

At midday on the forex market, the Euro was trading against 1,1270$

KEY GRAPHIC ELEMENTS

For now, the Euro / Dollar currency pair is still in the course of a wedge consolidation wedge, which fits into a strongly bearish background momentum. The configuration remains heavy, but we warn against the temptation of an early return to bearish positions, the “risk” of a false top exit, in the very short term, being present. We are still waiting for a much better entry point.

MEDIUM-TERM FORECAST

In view of the key graphical factors that we have mentioned, our opinion is neutral in the medium term on the pair Euro Dollar (EURUSD).

We will keep this neutral opinion as long as the price of the pair Euro Dollar (EURUSD) is positioned between the support at 1.1150 USD and the resistance at 1.1360 USD.

DAILY DATA CHART

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