The Euro/Dollar picked up steam on Friday and appears poised to expand on its rebound gains as the USD comes under intense selling strain before the weekend trading session.
As a result of recent reports indicating that conventional coronavirus vaccinations may be inadequate against a substantially mutated novel coronavirus strain discovered in South Africa, speculators are rethinking their expectations of the Federal Reserve’s monetary stance.
As of Thursday, the CME Group’s FedWatch Tool showed that markets are pricing a 34% likelihood that the Federal Reserve will leave its policy rate steady by June 2022, up from an 18% probability on Thursday. Furthermore, the yield on the 10-year US Treasury note is falling by over 7% daily.
Approximately 100 variants of the new B.1.1.159 strain have been discovered, according to the World Health Organization (WHO), and a preliminary investigation indicates that it has “a substantial number of mutations.”
The US Currency Index has fallen roughly 0.5% so far today, a reflection of the broad-based weakening in the United States Dollar.
There will be no high-quality macroeconomic data reports this week, and investors will be paying close attention to news on the coronavirus. Even though the Dollar is expected to outdo risk-sensitive currencies, it may struggle to gain ground against the Euro, as market players are reluctant to price in the policy discrepancy between the Federal Reserve and the ECB.
Technical Assessment Of The EUR/USD
EUR/USD CHART Source: Tradingview.com
The analytical picture for the EUR/USD in the short term has shifted in favor of the bulls. The Relative Strength Index (RSI) signal moved over 50 for the first time in a week, and the duo is maintaining their position above the 20-period simple moving average (SMA).
At the moment, the duo is challenging the 50-period simple moving average (SMA) at 1.1280, and further advances towards 1.1300 (psychological threshold) are possible. If buyers are successful in turning the latter into support, the next resistance is located around 1.3570 (stationary level).
Supports are situated at 1.1230 (20-period simple moving average), 1.1200 (psychological threshold), and 1.1185 on the downside (2021 low).
Review Of The Fundamentals
On Thursday, the Euro gained ground against the Dollar and is expected to continue to rise toward 1.1250 on Friday. Economists at ING predict that the world’s most prominent exchange rate will maintain its position above 1.1200 through this weekend.
They believe the Euro is still susceptible as a result of the COVID predicament in Europe, which is further broadening expectations for the US-EZ interest rate differential.
The concern now is whether or not the new strain has already made its way to Europe. Because of the new variation, the Euro might suffer another setback, further depressing EZ confidence and the euro, which has otherwise modestly benefited from its low-yielding position as the new variant rocked markets and is expected to maintain above 1.1200 through the weekend.