The End of Era: What Might the UK Face Next?
The deafening news shocked the whole world yesterday: the British Queen Elizabeth II died peacefully at the age of 96…
Major banks predict stronger USD and weaker EUR
Information is not investment advice
What happened?
EUR/USD dropped, driven by rising US bond yields. From the technical point of view, the pair should pull back to the upside from the current levels. However, some analysts believe the recent drop of EUR/USD is the beginning of a further downtrend. Why?
- The yield paid on US bonds keeps rising, especially in recent days, as people worry that their investments will be eaten away by higher inflation in the future. If the current tendency continues, EUR/USD will keep falling over the coming weeks.
- Eurozone’s slow vaccine rollout hit the EU's economic recovery and pushed the euro down.
Banks’ forecasts
Crédit Agricole: "We believe that the improving US outlook, coupled with more persistent inflation overshoot could result in higher UST yields and a stronger USD in coming months”.
Saxo Bank: "Real US yields have risen and a continuation of the spike could support the greenback and push EUR/USD over the edge of 1.2000 and thus into the old range down toward 1.1600".
Technical tips
EUR/USD has been moving in an ascending channel since mid-summer. Since it has approached the lower trendline at 1.2030, we can expect the pair to bounce off rather than break out. If it manages to break above the resistance of 1.2100, the way up to the 50-day moving average of 1.2150 will be open. In the opposite scenario, if the pair breaks below the lower trendline at 1.2030, the way down to the low of February 4 at 1.1950 will be open.
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