EUR/USD: Ready to run? Lagarde’s “license” to rise, coronavirus optimism point higher

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  • EUR/USD has been moving higher as ECB speakers reiterate their comfort with the euro’s value.
  • The resumption of a COVID-19 vaccine trial is outweighing rising cases in the old continent. 
  • Monday’s four-hour chart is painting a bullish picture. 

“We do not target the exchange rate” – Several members of the European Central Bank have echoed Christine Lagarde, President of the ECB, over the weekend. While officials from Vice President Luis de Guindos to Chief Economist Philip Lane said the euro’s value impacts inflation, their lax approach is seen by some as a “license to rise.”

Goldman Sachs went as far as saying EUR/USD’s fair value is 1.30, citing the ECB’s acceptance of a higher rate as one of the reasons for seeing it rise.

The world’s most popular currency pair is trading 1.1850, gaining ground in response to Thursday’s decision by the bank and also as the safe-haven dollar loses ground on fresh optimism about a coronavirus vaccine.

AstraZeneca and the University of Oxford announced that their COVID-19 immunization project  – considered one of the world’s most advanced – will resume in the UK. The Phase 3 trial was halted after one of the participants fell ill. Pfizer, a larger pharma firm, hopes to be able to supply doses of a vaccine by year-end.

Investors seem to be shrugging off the rise in coronavirus infections across the old continent. Spain, France, and Austria have been standing out in news reports. While cases are increasing, deaths remain at low levels and health systems are coping so far.

Source: FT

Falling COVID-19 infections and mortalities in the US are set to contribute to a “no-change” decision by the Federal Reserve later this week. The world’s most powerful central bank announced a long-term dovish policy shift – prioritizing full employment at the expense of higher inflation.

America’s Consumer Price Index figures came out above expectations in August, but are unlikely to move the needle for markets. Investors are also eyeing retail sales statistics due out on Wednesday, the same day as the Fed.

Overall, markets are upbeat after a turbulent week, and without surprisingly depressing news, Monday’s session could see further EUR/USD gains.

EUR/USD Technical Analysis

Euro/dollar has moved above the 100 Simple Moving Average on the four-hour chart after advancing above the 50 and 200 SMAs earlier on. Momentum remains to the upside and the currency pair is holding above the uptrend support line it recaptured.

All in all, bulls are in control. 

Some resistance awaits at 1.1875, which was a swing high late last week. The next level to watch is 1.1920, the post-ECB peak, followed by 1.1965 and 1.2010.

Support is at 1.1820, which was a cushion late last week and where the 50 SMA hits the price. The next level is 1.1780, a support line from early September, followed by 1.1750, a double-top formed in recent weeks.

More Lagarde gives the euro some legs, but the rabbit hole is near – how central banks move currencies

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Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.