EUR/USD Bulls To Hold Within 1.1265-1.1485 Range
LiteForex | Feb 18, 2019 10:44AM ET
Despite the weakness of eurozone economy and the ECB dovish rhetoric, bulls managed to draw EUR/USD back above 1.13. What could be worse than discouraging economic data? Mixed data. The U.S. dollar quite dramatically responded to a decline in industrial production as all the other indicators related to the sector were sending positive signals. The same was the case with retail sales and consumer expenditure. The reason could be found in the government shutdown, but the fact is that investors are preparing for a decline in the U.S. growth and expect worse statistics in the near future. It is not that pleasant news for the greenback, which is also pressed down by the de-escalation of the U.S.-China trade conflict.
It would seem that everything began so well for the EUR/USD bears. Benoit Coeure said that they were discussing to resume LTRO, but the ECB must be confident that the program serves the purposes of the monetary policy. The maturity dates of the previous rounds of long term refinancing worth €720 billion are approaching and the banks warn that they will have to look for alternative sources of funding. This will result in higher rates of credit markets, that is, to tighter financial conditions, unwelcome to the euro area.
Dynamics Of The ECB Balance Sheet
Source: Bloomberg
Furthermore, the governor of the Bank of France Francois Villeroy de Galhau noted that the Governing Council may change its outlook for the interest rate unless there are any proofs that the decline in GDP growth is temporary. The ECB members’ dovish rhetoric sent the EUR/USD rate to the three-month low, but the bulls manage to fight back. When both the ECB and the Fed are willing at least to retain the former monetary policies, the major currency pair is affected by other factors. First of all, it is about trade wars. According to Donald Trump, the U.S.-China trade negotiations reach great progress.
The parties agreed to sign a memorandum and outlined the concessions, they are willing to make to each other. In theory, the boosting of U.S. exports to China is positive for the global economy. To consume it, China will have to resort to a significant fiscal and monetary stimulus. Another matter is whether the U.S. current production capacity will allow it to expand the export so much that it will balance foreign trade. But still, the progress in trade talks improved global risk appetite and pushed the EUR/USD rate up. It would seem that everything was going well for the bulls, but Donald Trump received the report on national security on February 17. The information remains unveiled, but it may unleash steep tariffs on imported cars and auto parts, provoking a new round of trade wars.
Get The News You Want
U.S. Car Imports
Source: Bloomberg
The progress in U.S.-China trade relations stabilized the EUR/USD around the bottom of consolidation range of 1.1265-1.1485, and the bulls are going to hold it within the range.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.