Fundamental analysis of FOREX for April 27, 2021
Weak economic statistics in Germany, soft rhetoric of the ECB representatives and an insider from Bloomberg that the Fed may begin to cut QE earlier than promised, did not allow the EUR / USD buyers to gain a foothold above the base of the 21st figure.
According to Nordea Markets analysts, investors underestimate the chances of a quick recovery of the US labor market to pandemic levels and the achievement of inflation targets of 2%. Experts believe that the Fed will need to begin normalizing monetary policy, if not this, then early next year. If so, then it’s time to start buying the dollar. But forex currency trading depends on many factors.
Any economy develops cyclically. Growth is followed by recessions, which are again replaced by periods of recovery. Central banks should be sensitive to current trends and give or take away incentives in time to prevent the possibility of overheating.
However, there is now a rather unique case in which the growth of the United States economy is significantly outstripping the pace of global economic recovery. In such conditions, the Fed should not act according to the templates that several generations of investors are used to, but according to a completely different scenario. The Fed, as representatives of the regulator have repeatedly stated, agrees to tolerate inflation rushes above the target levels and is even ready to go for overheating of the economy, as it considers these phenomena to be temporary. Alas, the markets cannot move away from the established worldview and expect that the Fed is about to start raising rates on federal funds.
Investors are again testing the Fed for strength, as it was in March, when Treasury yields were growing by leaps and bounds, and Jerome Powell’s team was non-stop repeating the mantra about the wait-and-see policy of the Central Bank. And although bond yields went down in April, depriving the dollar of the main trump card of support, the markets did not calm down. Verification tests will continue, especially as the United States economy is booming more than ever.
How can this threaten? Buyers of EUR / USD should be prepared for pullbacks, and quite deep, although in the medium term, the pair’s trend will remain upward. And the point is not only in the weakness of the dollar, but also in the strengthening of the position of the single currency, including due to the increase in the rate of vaccination.
The Eurozone is getting back on its feet, so I continue to adhere to the Forex trading strategy with the purchase of EUR / USD on pullbacks to 1.2044, 1.2000 and 1.1965. We are following the releases on European and American GDP for the first quarter and awaiting the results of the FOMC meeting