Alfa-Forex: EUR / USD – the euro has no reason to rise yet

10 March 2021

Over the last weekly session, the main currency pair EUR / USD dropped 1.3%, ending trading below the psychological support of 1.2000. The demand for the American currency, caused by the sale of US Treasury bonds, was supported by strong data on business activity and employment. In February, the Institute for Supply Management (ISM) recorded an increase in activity in the manufacturing sector to highs since September 2018 – 60.8 points, the experts’ forecast was 58.6 points. The labor market for the same reporting period grew by 379 thousand jobs outside agriculture (Nonfarm Payrolls), and the overall unemployment rate fell from 6.3% to 6.2%. Thus, the US economy continues to show signs of recovery, giving rise to expectations that the Fed’s soft rate will end this year.

Investors will focus on the European Central Bank’s monetary policy meeting this Thursday. The regulator is likely to keep the key rate at 0%, the rate on deposits at minus 0.5%; The bank’s chairman, Ms. Lagarde, will announce the decision at a press conference at 4:30 pm Moscow time. Traditionally, during this period, there will be increased volatility, on which players will try to find a foundation for selling the single currency.

The EUR / USD pair has consolidated below the level of 1.2000, which will become the main resistance until the end of the week and create conditions for a further decline to 1.1600-1.1800.

RUBLE – political risk premium holding back strengthening

The market for ruble-denominated instruments remains nervous. External factors associated with the sanctions rhetoric of the West do not allow the national currency to win back the geopolitical risk premium against the backdrop of expensive oil. Brent quotes exceeded $ 70 per barrel at the moment, adding weight to the ruble. However, the expectation of another package of US sanctions is putting pressure on the Russian government bond market. The likelihood of such a scenario is still assessed as insignificant, but surges of volatility are still observed in the statement of Western politicians. Among the internal factors, there are also positive ones: for example, the index of business activity in the manufacturing sector from HSBC (Manufacturing PMI) in February rose from 50.9 to 51.5 points; the consumer price index (CPI) for the same reporting period rose by 0.8%, exceeding the forecast of 0.6%. The acceleration of inflation, which has been recorded since the beginning of this year, serves as a reason for the Bank of Russia to tighten monetary policy. It is possible that this will happen at the next meeting in March.

The USD / RUB pair continues to trade in the range of 72.70-76.60 rubles, maintaining the downward momentum.

The EUR / RUB pair is trying to push the lower border of the trading corridor of 88 rubles in the direction of 85.50 rubles per euro. The nearest resistance is the level of 91 rubles per euro.

This information is not investment advice.

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