The EU plans to intervene in markets directly to curb rising energy costs, threatening to push the Euro area's economy into a deep recession.
ING believes EUR/USD will break 1.20, and you?
2021-04-15 • Updated
What is moving the markets these days? What are the main drivers of currency pairs?
First, the vaccination pace. The second, the recovery speed. And finally, investors are concerned about how soon the central banks will tighten the policy (increase rates or/and cut asset purchases).
Let’s analyze the most traded pair – EUR/USD. At the first sight, the US is doing better than the Euro Area. The percentage of vaccinated people is much higher in the US than in the EU. Elsewhere, after problems with AtraZeneca’s vaccine, Johnson & Johnson stopped sending its vaccine to the EU as well because of the possible negative side effects.
While the US does not depend on J&J, Europe may suffer a delay of 3-4 months to obtain its goal to vaccinate 70% of the population. As a result, it may significantly worsen the situation in Eurozone and press the euro down.
However, EU Retail sales came out much better than expected this Monday: 3.0% vs the forecast of 1.3%. It’s just the beginning of further growth – more to come in the months ahead! Elsewhere, according to Barclays, European people acquired savings at 600 billion euros ($714 billion) during long lockdowns. But when they feel free to go out without any restrictions, they will tend to spend them more. So, consumer spending will grow and help the economy to recover.
ING foresees the tentative recovery for Europe. The bank points that the USD has started losing its steam and the breakout of EUR/USD above 1.2000 is very likely! According to ING’s model, EUR/USD is undervalued by almost 2%. Indeed, if you look at the chart below, you’ll notice that the RSI indicator is well below 70.00 level, so it’s not overbought.
US retail sales today
Today US retail sales will come out at 15:30 MT and will have a great impact on EUR/USD. The general rule is that if US retail sales are better than expected, the USD will surge; if worse – the USD will fall. However, some analysts believe that if retail sales come out better than the forecasts, it may fuel the ongoing risk-on sentiment and press down the USD, which will push EUR/USD higher. Anyway, follow the results and keep an eye on the charts.
EUR/USD has failed to cross the resistance of 1.1990-1.2000 so far. However, if it does, the way up to the 100-day moving average of 1.2050 will be open.
On the flip side, if it breaks below the 50-day moving average of 1.1960, the way down to the 200-day moving average of 1.1890 will be clear.
The past two years have seen the biggest swings in oil prices in 14 years, which have baffled markets, investors, and traders due to geopolitical tensions and the shift towards clean energy.
The oil prices rally and world central banks’ dovish monetary policy caused by the Covid-19 pandemic were the main reasons for current inflation growth…
On Thursday, the 2nd of February, the Bank of England will publish its report concerning interest rates and inflation data for the Eurozone. Professionals and investors anticipate that Andrew Bailey’s lead team of policy makers will likely raise interest rates to 4%; the highest in over a decade, for the tenth time in a row.
The first FOMC meeting comes after a buildup of anticipation from traders and investors alike, as the markets await what posture the Fed will take regarding the interest rates; would there be a hike or a cut in interest rates?
Western countries are trying to find other options for oil and gas supplies after a 10th package of sanctions, which will put more pressure on Russian oil and decrease global oil supply. Italy, for example, is in talks with Libya.