EUR/USD Stages a Rebound as the US Dollar Deflates
EUR/USD Analysis
The pair comes from a negative week, during which it set two-year lows and the current one started on the back foot as well. Today however, it stages a relief rally, after having narrowly avoided fresh lows yesterday.
As such, we can see a test of 1.0919 and the 38.2% Fibonacci of the last leg down (form late-March, to last week's lows), but it will need daily closes above the EMA200 (at around 1.0970-80) to pause the downward bias.
However, we remain cautious at this stage for such moves and the upside has more roadblocks, as the ascending trendline form the 2022 highs follows at mid-1.1000s. The monetary policy differential between the European Central Bank and its US counterpart is unfavorable for the pair, as the Fed gears up for another rate hike, potentially of 50 basis points.
The broader downward trend remains intact and the currency pair has not escaped the risk of fresh two-year lows (1.0756), but 1.0635 looks distant.
Despite the upbeat mood in markets today, there are still multiple risk factors that could sour sentiment and contain the common currency's rebound.
The International Monetary Fund (IMF) slashed its 2022 World Growth forecast yesterday, to 3.6%, from 4.4% in the January projections. 2021 growth was estimated at 6.1% in 2021 (from 5.9% in January). Euro Area GDP was downgraded to 2.8% for 2022, from 3.9% in January [1]. A day earlier, the World Bank's President had announced that the institution is reducing its 2022 global growth projection to 3.2%, from 4.1% before [2].
China remains a source of worry in regards to its Covid-19 situation, especially in Shanghai which reported seven deaths for April 19, the third straight day of deaths [3]. The war in Ukraine remains in the spotlight, with president Zelenskyy asking for more weapons, saying that "If we had access to all the weapons we need, which our partners have and which are comparable to the weapons used by the Russian Federation, we would have already ended this war" [4].
Markets now turn to Eurozone's final CPI Inflation for March on Thursday, with the preliminary figure having shown a rise to 7.5%. Moreover, the presidents of the ECB and the Fed are both on tap, on the same day.
Nikos Tzabouras
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. With extensive experience in market analysis and a strong foundation in international relations, he brings a unique perspective to financial markets. Nikos emphasizes not only technical analysis but also on fundamentals and the growing influence of geopolitics on financial trends.
As a Senior Financial Editorial Writer, he delivers comprehensive and forward-looking insights across a wide range of asset classes, including equities, commodities, and currencies. His work explores how macroeconomic events, political developments, and global policies impact market dynamics, providing readers with a deeper understanding of both short-term movements and long-term trends.
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