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Euro price forecast 9 March 2021

2021-03-09

2021-03-09

Euro is to find a way out. Forecast as of 09.03.2021Dmitri Demidenko

The ECB’s actions are different from the words, and the adoption of the $1.9-trillion stimulus from Joe Biden in the House of Representatives could suspend Treasuries’ sales. Will it support the euro? Let us discuss the Forex outlook and make up a [EURUSD][1] trading plan.

Weekly euro fundamental forecast

If you have a will, you will find a way. The ECB, stating its willingness to interfere and suspend the euro-area bond yield rally that negatively affects the European economy, has been reducing the volume of asset purchases for the second consecutive week. In the week ended March 5, the net purchases amounted to €11.9 billion; a week earlier, the ECB bought €12 billion. The average purchase pace since the PEPP start has been €18.1 billion per week. The European central bank tries to explain the latter figures with massive redemption amounts. However, if there is a will, they will find a way, won’t they?

The discrepancy between words and facts suggests that the Governing Board meeting on March 11 will not be as dovish as the market expects. This circumstance may support the [EURUSD][1], as the ECB’s negative influence has been priced to a great extent. Moreover, the rise in the euro-area bond yields doesn’t worsen the financial conditions in the euro area much, and the recent drop in the euro exchange rate suggests the inflation rate should increase.

To the disappointment of the [EURUSD][1] bulls, the European Central Bank is not the only player in the city, and neither is it the most powerful one. Without a break in the US Treasury yields, the dollar buyers will hardly be discouraged. Investors need strong arguments to justify why an 8%-10% expansion in US GDP in the first quarter should not strengthen the greenback.

Expecting the US economic rebound, asset managers are selling treasuries and technology stocks and buying equity securities in banking and energy sectors, which are likely to experience explosive growth along with GDP. As a result, the [Dow Jones][2] breaks through intraday highs, and the [Nasdaq Composite][3] has tumbled into the bearish market, dropping 10% from its February 12 record highs. This kind of divergence in the stock indices’ trends has not occurred since 1993.

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Source : Bloomberg.

In terms of the debt market, investors still don’t seem to understand how the Fed’s average inflation targeting policy works. They are not willing to get rid of TIPS, which provide clearer Fed policy signals than their counterparts without inflation protection.

Dynamics of TIPS yields

Source : Wall Street Journal

Jerome Powell and his fellow central-bankers believe that the consumer price spike will be temporary. Treasury Secretary Janet Yellen has the same opinion; she noted that the Fed has the tools to act if something goes wrong. The market continues to trade reflation, especially since the House of Representatives may approve the $1.9 fiscal stimulus plan on March 10.

Weekly [EURUSD][1] trading plan

I suppose the fiscal stimulus adoption could suspend the Treasury sales. Markets grow on the rumors and fall on the facts; the same applies to the US Treasuries. The [EURUSD][1] reached the target at 1.185 [indicated earlier][4]. The market could stop falling and find support in the zone of 1.18-1.185.

Price chart of EURUSD in real time mode

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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  1. my.liteforex.com/trading/chart?symbol=EURUSD&returnUrl=true
  2. my.liteforex.com/ru/trading/chart?symbol=YM
  3. my.liteforex.com/trading/chart?symbol=NQ&returnUrl=true
  4. www.liteforex.com/blog/analysts-opinions/dollar-conquered-the-market-forecast-as-of-05032021/