Friday, December 3

The euro / dollar exhausts the margin of falls

The price of the euro / dollar broke the bearish streak and traded with moderate increases this Tuesday, after the re-election of Jerome Powell as Fed Chairman. The world’s most traded currency pair practically exhausted its downside margin.

The euro / dollar is incubating a short-term floor that now seems to be around the corner after clearing the unknown about the Fed’s presidency.

Jerome Powell’s choice is bullish for the dollar in the long term, but once it has approached these levels, and after a drop that comes from $ 1.22, what to expect is the rebound.

Bounce to the visa for the euro / dollar

“It is likely that in this oversold situation there will be some kind of upward rebound,” he said. Miguel Angel Rodriguez, forex market expert, on the market closing podcast for

Technically “there was a double top formation that was targeting 1.12 (or $ 1.115), and we are already very close,” said this expert.

If the declines continue, the bearish target would be at most $ 1.1150, Rodríguez added, and so far there is barely a 1 percent margin of decline.

Afterwards, you have to wait for a rebound and then everything will depend on the monetary policy of the Fed.

Discarded the parity between the euro and the dollar

What Rodríguez did completely rule out is the possibility that the euro and the dollar will catch up, even when the long-term fundamentals of the greenback are bullish.

“This fall comes from very far, from the level of 1.22 and there are ten figures, so for the moment we do not contemplate it,” he added. Rodriguez.

What is certain is that the ECB’s monetary policy will continue to be ultra-expansive and this puts downward pressure on the euro, in a context where the coronavirus continues without respite to the European economies and the recovery is caught with pins.

Should the rebound run its course, the euro / dollar will meet intraday resistance at 1.1357 units, they told Bloomberg Intelligence analysts.

Trading opportunities in the dollar / yen

Since movements in the currency market are like tectonic plates and they are all correlated, Rodríguez pointed out that there are trading opportunities in other currencies.

One of the currency pairs that has the highest correlation with interest rates is the dollars/yen. Specifically, the dollar has strengthened and the Japanese currency has weakened, with which the pair “has reached a significant resistance level at 114.5 units,” the sources consulted said.

It is an important area and if the price breaks it ahead there is “a lot of upward road”To the joy of the Japanese Ministry of Finance, which wants a weak currency, there is no problem there, Rodríguez added.

The only thing to keep in mind is that the yen is a safe haven currency, so if there were any correction in the stock markets and a rise in risk aversion due to the pandemic or due to some geopolitical event, the rise in the dollar would slow down. /and in.

More hardships for the Turkish lira

Finally, Rodríguez considered that the Turkish lira still has more bearish path ahead. “Lowering interest rates with inflation of 19 percent is completely unorthodox,” said this expert.

It is true that the Turkish lira has fallen 60 percent this year, which does not change much the outlook for a possible rebound either. “With the macro data in Turkey and the balance of payments deteriorating, it is most likely that the currency will continue to weaken,” he added. Rodriguez.

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