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Investing.com – The pair made its dive sharply worse yesterday, marking a new annual low at 1.0930, the lowest since May 12, 2017, more than 2 years ago.
Recall that the Euro-Dollar has fallen almost continuously since the very beginning of last week.
However, if the fall of the Euro last week could be explained by a strengthening of the Dollar, which benefited from a relative easing of China-US relations, this is not the case this week.
The Dollar has certainly continued to grow, but without any further improvement in the outlook for the trade war between the two largest economies in the world.
Worse, Bloomberg unveiled yesterday that China and the United States are struggling to agree on a meeting in September, while the prospect of these face-to-face discussions had excited the markets last week.
The market is turning its attention to the ECB
If the Euro continues to weaken this week, it may be that the market is turning its attention to the ECB, which should just as the Fed relax its monetary policy in September.
In this regard, it should be noted that euro area money markets now include a 60% probability of a 0.20% drop in the deposit rate of the European Central Bank (ECB) at its next monetary policy meeting. which would exceed the expectations of economists if that were confirmed.
Who will be the most dovish? Fed or ECB?
Over the next few weeks, the evolution of the Euro-Dollar will therefore largely depend on who will be the most dovish: the Fed or the ECB. If it is the ECB, the decline in the EUR / USD should continue.
But if the Fed finally accedes to the demands of Trump by lowering its rates sharply, the Euro could climb, since the Fed has much more room for maneuver than the ECB to relax its monetary policy.
To watch in the economic calendar of the day
In the shorter term, Tuesday's economic calendar will offer some opportunities to see volatility rise.
This morning, it is the euro zone that will be monitored. The consensus forecasts a PPI at 0.2% in annual data, after 0.7% the previous month.
In the afternoon in the United States, we will first monitor the second estimate at 15:45, but it is especially the expected index at 16h that could influence trade.
It should show a slight decrease to 51.1 points after 51.2 the previous month according to consensus forecasts.
Technical point EUR / USD
Finally, from a graphical point of view, note that the recent low at 1.0930 and the psychological threshold of 1.09 are the first two supports to take into account.
On the rise, 1.0950 is to be considered as an immediate resistance, before the key psychological threshold of 1.10. However, a return above 1.11 seems necessary to start seriously questioning the underlying bearish bias.
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