The bounce of the Euro has run out of steam

11 march 2022 94
Volkov_Anton
Volkov_Anton

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After setting the minimum of 1.08052 (the price has not fallen below this level since the spring of 2020), the EURUSD currency pair made an upward bounce. The growth was almost 3% for 3 days. But, having reached the resistance of 1.112, the price reversed down again. Has the upward momentum dried up or will the growth resume?


The yesterday's ECB meeting was a crucial event for the Euro this week. Changes in interest rates were not expected and they did not happen. The changes will affect asset repurchasing programs.


So, under the PEPP emergency program, buys will be finished by the end of March. As for the APP program, the asset buys volume will be reduced by EUR 10 billion per month with the prospect of finishing buys in the 3rd quarter this year.


Only after the completion of all asset repurchasing programs, is it possible to increase interest rates. However, in the situation of the energy crisis and the active introducing restrictions on trade with Russia, the ECB in fact has not possibilities for the sharply monetary policy tightening without serious negative consequences for the European economy.



An important piece of news for the US currency was the publication of inflation data for February. Price growth has accelerated again, this time from 7.5% to 7.9%. Even worse, core inflation (except food and energy prices) has risen at an even faster rate: from 5.9% to 6.4%. The March figures will be definitely higher including explosive growth of the price for oil, wheat, and many other commodities.

 

For the United States, in contrast to European countries, economic sanctions against Russia are less painful. This means that the Fed has every reason to raise the key rate by 0.25% at the meeting on 16 March. The status of the US currency as a defensive asset in case of high volatility of global financial markets also benefits the dollar in the EURUSD pair.



2 trading strategies can be considered:

 

1) Selling EURUSD at the current price. Take profit 1: 1.09. Take profit 2: 1.0805. Stop loss: 1.112.

 

2) Selling EURUSD when rising to the resistance of 1.112. Take profit: 1.09. As Stop loss, you can use Trailing stop along the downtrend line, now the trend is near the level of 1.12.

Volkov_Anton
Volkov_Anton

Listed among the best MarketCheese authors
1st in the segment "Currencies"
2nd in the segments "Indices" and "Metals"
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