Today we shall take a look at the EUR/USD currency pair. Last week the pair remained more or less flat close to the 1.16 level before closing lower. Now we see it trading around 1.1560 but it has a slight bullish bias at the moment but it probably won’t last long.
The European single currency continues to struggle due to the divergent monetary policies of the ECB and the Federal Reserve. The European Central Bank, which was dovish for a long time after the 2008 crisis, is expected to also remain this way in the aftermath of the coronavirus pandemic. Investors are increasingly believing more and more that ECB President Lagarde truly means what she says when she warns that it is too early for an interest rate hike, and that it will be early for a long while yet. Other regulators, including the Fed, are also cautious, but the ECB appears to be one of the most reluctant banks when it comes to monetary policy tightening. Plus, the German Bund yields are much lower compared to US Treasury bonds, which explains why the euro is weaker than the dollar right now.
As for the US dollar, it is also not without problems of its own. Last week’s Federal Reserve meeting was rather confusing for the markets. Chairman Jerome Powell met investors’ expectations by announcing that the regulator will start tapering its asset purchases this month, as predicted. However, he did not deliver in regards to interest rate hikes. Many had hoped that the Fed will push raising the rates sooner than planned, but Powell warned that tapering might be enough for the time being and that he expects inflation to drop on its own in due time. This explains why the USD has been less stable lately - market participants are still deciding what to make of the situation in the United States.
In terms of the daily chart, today we have a pivot point for the pair located at 1.1564, with the price currently trading above it. The daily support levels lie at 1.1558 and 1.1549. The daily resistances are located at 1.1573 (overcome) and 1.1579. The indicators of technical analysis strongly agree in recommending a sell position today.
