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Christine Lagarde could not weaken the position of buyers

Fundamental analysis of FOREX for April 23, 2021

The economy of the Eurozone still cannot get rid of the yoke of the pandemic, and the European currency is gaining confidence every day, although yesterday’s speech by Christine Lagarde made buyers take a break.

Nevertheless, the pair’s decline to the base of the 20th figure is immediately redeemed, which indicates the seriousness of the bulls’ intentions.

Yesterday, the head of the ECB again noted the negative consequences of the pandemic and assured that before the transition to a tightening of the monetary policy, the regulator must make sure of the stable growth of the European economy and the achievement of inflation and employment targets. The Central Bank intends to start normalizing not by raising interest rates, but by reducing the asset purchase program, which has now expanded from € 14 to 17 billion. At the present time, the issue of reduction is not on the agenda.

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Dynamics of weekly purchases of ECB assets under PEPP

Christine Lagarde assured investors that the ECB is closely monitoring the exchange rate of the single currency and noted the facts of monetary policy divergence and economic growth between the United States and the Eurozone, hinting that the European Central Bank will move to tighten policy only after the Fed. Indeed, the Old World loses to the New in many respects. Specifically, JP Morgan forecasts a 6% increase in GDP in the Eurozone in the second quarter, and 10% in the US.

Of course, the head of the ECB deliberately scared off buyers of the euro. The fears of raising taxes on wealthy Americans from 20.9% to 39.6%, which sent stock indexes into decline, also added negative to the bulls.

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Nevertheless, despite the correlation of currencies and stock indices, a deep pullback in EUR / USD did not happen. The upward movement is quite stable, but the pair needs a new driver to continue growing. These could be the releases of the Eurozone business activity indices. The index projections are not very impressive, but the acceleration in the pace of vaccinations in April could significantly improve the actual numbers.

The EUR / USD bears are not helped by the growth in the yield of American Treasuries, and without its support EUR / USD will hardly be able to sink deeply. Bond rates remain in a narrow range ahead of the Fed meeting. But here, too, investors are not expecting any special surprises. Most likely, Jerome Powell will repeat the words of Christine Lagarde about the premature reduction of the QE program.

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Our forex trading method of buying a pair on any pullback remains in effect. Consider longs on rebounds from supports 1.2000-1.1990 and 1.1940-1.1935. We also add purchases upon breakout of local highs. We are waiting for the release of the indexes of business activity in the Eurozone.

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