Alfa-Forex: EUR / USD – euro risks accelerating decline

21 July 2021

The euro against the dollar in the global foreign exchange market may develop bearish dynamics. July inflation data strengthened investor confidence that the Fed intends to change the course of monetary policy. According to a report released on July 13, the consumer price index (CPI) rose from 5% to 5.4% in annual terms; the price index excluding food and energy (CPI ex Food & Energy) was 4.5% versus 3.8% compared to the same period last year. Thus, the statements of FED officials about a short-term surge in inflation have not yet been confirmed in official statistics, which logically fuels speculation about the curtailment of quantitative incentives in the United States.

The EUR / USD pair is consolidating below the resistance of 1.1850-1.1900 and is accumulating energy for a maneuver in the direction of 1.1620-1.1700.

RUBLE – pessimism gripped the market only for a while

The national currency completed a three-month bullish trend and entered a phase of decline against the dollar and the euro. The demand for the ruble fell mainly for two reasons: the Ministry of Finance announced the purchase (in accordance with the budgetary rule) of foreign currency in the amount of 296 billion rubles; oil fell from $ 78 to $ 71 per barrel of Brent, forcing Carry Trade investors to cut volumes in rubles. In addition, the strengthening of the dollar is due to economic success, confidence in the dollar is growing everywhere, and this puts additional pressure on the national currency. The situation on the Russian debt market also does not contribute to a change in mood: the government bonds index (RGBI) is gradually moving towards an annual low and has already reached the level of 143.7 points.

Next Friday, the Bank of Russia will hold a scheduled meeting on monetary policy, at which it is expected to increase the discount rate by 50 basis points at once to 6%. This measure is in line with the regulator’s inflation targeting plan and may help boost demand for the ruble at the end of the week.

The USD / RUB pair is consolidating above the support level of 73.60 rubles and seeks to develop growth towards the resistance of 75.50 rubles per dollar.

This information is not investment advice.

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