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After the US releases, the markets took an unexpected pause

Fundamental analysis of FOREX for April 16, 2021

Analysts did not disappoint. The market reacted to the publication of yesterday’s strong US economic releases in the same way as to the release of Non-farm Payrolls. The S&P 500 has renewed its all-time high for the 21st time since the beginning of the year, while treasury yields have declined. However, as they say, there is a nuance. The dollar has strengthened after all.

The pace of economic recovery in the United States is truly impressive. The report on retail sales published yesterday showed an increase of 9.8%. The number of applications for unemployment benefits fell to 576 thousand – the lowest since the beginning of the pandemic. However, Treasury yields are the worst performing since November last year. According to one version, the reason for this is the increased activity of Japanese investors, who at the end of the financial year were actively selling bonds and covered short positions with hedging in Forex.

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Most US debt bonds were sold in the Cayman Islands, where the highest concentration of highly leveraged companies. Bond stocks fell by $ 49 billion in January and another $ 62 billion in February, according to the Finance Ministry.

Trends in hedge fund stocks and bond yields

Be that as it may, but Treasury rates are falling, which is a “bearish” factor for the dollar. Perhaps the markets have not yet had time to comprehend the information and in the very near future, purchases of risky assets will resume.

It is possible that investors were rather restrained in accepting reports from China, which put pressure on the single currency. It would seem that the GDP of the first quarter in the PRC grew by 18.3% – is this not a reason for strengthening the risks? In fact, such a high growth is associated with a low base last year. According to HSBC, if we take into account these distortions, the economy of the Middle Kingdom expanded by 5.4%, which is a rather weak indicator for China.

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According to Bloomberg experts, the ECB will begin to cut the asset purchase program by July and completely abandon it in March 2022. At the next meeting of the regulator (April 22), it is unlikely that any changes in monetary policy will be introduced. Together with the improvement in business activity in the Eurozone, this is a factor of support for the single currency.

I believe that after a short pause, EUR / USD will continue to rise. If the resistance of 1.1990 is broken, the pair will move to the levels of 1.204 and 1.208

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