· In terms of fundamentals, there is still a combination of elements that argues in favor of the downward trend of the euro dollar. ATTENTION, however, to the reaction of Trump + FED to raise the price of the euro dollar.
· From a technical point of view, the EUR / USD rate records new annual lows on the basis of the closing price in daily data.
· You will finally find a 26-minute video (at the bottom of the page or on the Youtube channel "TradingView France" which offers detailed technical analysis of the euro-dollar rate, as well as a technical overview of my market views for major Forex pairs for this session on Friday 30 August 2019 (EURUSD, GBPUSD, USDJPY, USDCAD, AUDUSD and NZDUSD).
AT) FUNDAMENTALS ALWAYS FALLING FOR EUR / USD RATE BUT ATTENTION TO REACTION OF TRUMP / EDF COUPLE
The price of the euro / dollar (EUR / USD) is currently in contact with its annual lows, which correspond to the price level of the year 2017, against a background of largely negative interest rates in the Euro Zone and a growing risk of recession for Germany. This week in the credit market of the Euro Zone, it is the curve of rates in Italy that flattens further in the wake of the new government coalition in Italy.
Officially and in its statutes, the European Central Bank (ECB) has no objective related to the exchange rate of the single European currency. But in the current context of the trade war with the United States, the "currency war" has become one of the dimensions of the clash, becoming almost vital for the manufacturing sector on both sides of the Atlantic. Last Tuesday, Germany's negative growth rate in the second quarter was confirmed.
It should be understood that the price of the euro dollar would already be well below the $ 1.10 if the decline in the EUR / USD rate was not "curbed" by the Federal Reserve (FED), which lowered its interest rate refinancing of 25 bps on Wednesday, July 31st. The US economy is currently the only western economy to remain at the top of the cycle, while the trade war has clearly broken the pace of growth for China, Germany and Japan. Logically, the US dollar is still at the top against a basket of major currencies, which displeases Donald Trump who wants to bring foreign exchange competitiveness to its companies.
Recall that cyclical activity indicators show a very negative slope for the exporting industry. The fall of the Euro has never been desired by the Bundesbank, but this does not seem to be engraved in the current context. The best illustration of this cyclical deterioration is the strongly downward and largely negative slope of Germany's 10-year bond yield.
The autumn of 2019 combines several fundamental downside risks for the EUR / USD rate. The only uncertainty is the reaction that could have the Trump / FED couple to raise the price of the euro dollar and neutralize in general the upward momentum of the DXY.
A) Political risk : The major political trends in Europe have a strong influence on the price of the euro dollar. In 2017, for example, Macron's victory (and the defeat of extremes) had generated a strong upward trend for the euro. In the fall, it is the Italian political risk that should weigh, an important slippage of Italy would be bearish for the exchange rate of the euro. Let's also keep in mind the high probability of a Hard Brexit, resulting in releases on the British Pound (GBP / USD) and positive correlation, on the EUR / USD rate.
B) The macroeconomic risk If Germany is not yet in a recession for a full year, second and third quarter industrial aggregates make this scenario more and more likely. The negative pace of world trade is strongly penalizing German GDP, this is the main source of the slow decline in the price of the euro dollar in recent months.
C) An ultra-accommodating European Central Bank (ECB) : As a consequence of the first two risks, the ECB should announce ultra-accommodative monetary measures at its meeting in September, starting with a rate cut (towards a negative refinancing rate) and most importantly, the launch of a quantitative Easing 2 (QE2). A monetary creation which represents a factor of decrease for the exchange rate of the euro.
B) TECHNICAL ANALYSIS OF THE EURO DOLLAR COURSE: COMPLETE TECHNICAL POINT ON EUR / USD RATE AND MAJOR PAYMENTS IN USD
All the technical details can be found in the video below, thanks. Vincent
Euro dollar price: graph with the TradingView platform showing Japanese candles in daily data (left) and intraday data (right)
US dollar (DXY) against a basket of major currencies: TradingView chart that reveals Japanese candles in weekly data
Forex Trading with Vincent Ganne – 30082019
Forex Trading with Vincent Ganne – 30082019