Throughout last week's trades, the bulls were controlling the performance of the euro currency pair against the US dollar EUR/USD. Therefore, the currency pair moved towards the 1.1032 resistance level, the highest it has been in nine months. In the last trading session, the currency pair was subjected to strong selling operations to reap the profits. It then fell towards the support level of 1.0792, around which it closed the week's trading. Due to the announcement of figures stronger than all expectations for American jobs, it was a strong positive factor for the gains of the American dollar. This was negatively affected by raising the American interest rate at a lower rate than usual.
Euro best performing currency
Analysts and economists are divided on the outlook since the European Central Bank's interest rate decision on Thursday. The single European currency gave way to the Japanese yen and the Swiss franc last week while advancing against all other currencies in the G10 basket with its biggest gains in relation to the Norwegian krone and the British pound.
The euro fell last Thursday despite European Central Bank President Christine Lagarde making it clear that a 0.5% interest rate hike in March was likely to be followed by additional steps of an unspecified size over the following months. That did nothing to upset prices in the interest rate derivatives market, which sees the European Central Bank's deposit rate rising from 2.5% on Friday to nearly 3.25% by the end of the year, but left analysts and economists somewhat divided on the outlook for ECB policy and Single European currency.
The goal of the European Central Bank is to raise standard borrowing costs "to restricted levels and stay there long enough for us to be confident that at these rates we will achieve the 2% target" for inflation. But the definition of "adequate restraint" has not been collectively agreed upon by the European Central Bank's board of directors and will depend in part on European inflation figures to be released later in February after Germany's figures have been removed.
Last week's figures suggest that inflation fell from 9.2% to 8.5% in January while remaining unchanged at 5.2% once changes in energy, food, alcohol and tobacco prices are ignored, although some economists warn that these figures could be revised upwards once the Germany data is included. However, this is only one reason why analysts and economists currently differ in their expectations for the European Central Bank and the euro.
For his part, Silvia Ardangana, Chief Economist for Europe, at Barclays Bank, said: "Given the prior initial commitment to an additional 50 basis point increase in March, we believe that the risk of a retreat to 25 basis points is low and will require a significant improvement in inflation expectations and/or a significant deterioration in sentiment." the economy.” He added "We maintain our view that the European Central Bank will reach a final rate of 3% in March, based on our more moderate view of inflation. However, we see the risk of an additional 25 basis point hike at the May meeting if inflation dynamics are more stable than we currently expect.”
Technical analysis of the euro dollar EUR/USD:
- In the near term and according to the performance on the hourly chart, it seems that the EUR / USD currency pair is trading within the formation of a sharp downward channel.
- This indicates a strong downward momentum in the short term in market sentiment.
- Therefore, the bears will look to extinction on the extended declines at around 1.0767 or below at the 1.0736 support.
- On the other hand, the bulls will target the short-term profits at around 1.0825 or higher at the 1.0859 resistance.
In the long term and according to the performance on the daily chart, it seems that the EUR / USD currency pair trades within the formation of an ascending channel. This points to a large long-term upward wound in market sentiment. Therefore, the bears will target potential pullback profits at around 1.0666 or lower at the 1.0533 support. On the other hand, the bulls will look to pounce on profits at around 1.0905 or higher at 1.1028.
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