Euro price forecast 9 April 2021

2021-04-09

Euro buys the rumor. Forecasts as of 09.04.2021Dmitri Demidenko

The euro should have sunk amid the growing number of infections in Europe, confusion with the vaccines, lockdowns, and double-dip recession. However, the [EURUSD][1] is rising steadily. What are the reasons? Let us discuss the Forex outlook and make up a trading plan.

Weekly euro fundamental forecast

Do not play against the Fed. This truth is as old as the world, but it is still relevant. In March, financial markets tested the US central bank for strength, pushing up the yield on US Treasuries. Having made sure that Jerome Powell and his fellow central bankers remain calm, investors took a step back. The greenback lost its primary advantage, and the [EURUSD][1] has jumped above level 1.19.

The FOMC officials’ dovish stance pushed the [S&P 500][2] to a new all- time high, the 19th record close in 2021. The US treasury yields went down, weakening the US dollar. Jerome Powell noted that the March jobs report was impressive but not strong enough to start tapering the monetary assistance, and there should be several months of this kind of reports. St. Louis Fed President James Bullard believes that monetary policy changes should not even be discussed until the pandemic is over, and San Francisco Fed President Mary Daly noted that the US economic recovery is still very far away, and the Fed will wait until that happens. __

The US central bank is not willing to change the monetary policy, no one wants to go against the Fed, and the market begins to do what it usually does in such cases - it buys the rumor. The[EURUSD][1] rally looks unnatural amid the rising number of COVID-19 infections, Angela Merkel’s calls for stricter isolation, and the vaccine confusion in Europe, but investors are simply buying the rumor. The rumor about euro-area economic recovery amid soon lifting of lockdowns and GDP rebound. Germany’s factory orders data prove that the German economy has adjusted to the pandemic.

Dynamics of German factory orders

Source : Bloomberg

Of course, the [S&P 500][2] cannot set records every day forever, and the US economic strength suggests that the Treasury yields will resume growing. Therefore, [EURUSD][1] should not grow as fast as in early April for several weeks or months in a row. There are serious obstacles to the euro rally, but the market usually buys what it believes in. Now, investors believe in the vaccination progress in the EU, in the European Recovery Fund, and in the restoration of the euro uptrend.

The higher the US stock indexes climb, the more analysts talk about bubbles. As of late February, investors had borrowed a record $814 billion against their portfolios—up 49% from a year. It is the fastest annual increase since 2007. The same situation in 2007 subsequently led to the [S&P 500][2] crash, followed by the economic crisis.

Dynamics of borrowing against investment portfolios

Source : Wall Street Journal

Weekly [EURUSD][1] trading plan

Most likely, the current recovery will not be as long as the previous one, and the US economy will slide down into a recession again in 5-7 years. However, the stock market continues growing, and the euro is going to enter a new trading range. If the [EURUSD][1] bulls break out the resistance of 1.193-1.1935, the price will consolidate in the range of 1.185-1.2. If the resistance is not broken out, the consolidation range will be 1.18-1.195.

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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