EUR/USD: Upbeat market mood and optimism about the ECB unlikely to extend into another rally

EUR/USD has been rising as markets and a successful US bond auction helped calm markets. Nonetheless, a surge above 1.20 is unlikely as ECB President Christine Lagarde may lower the euro.

See –  European Central Bank Preview: Forecast from 14 major banks

Key quotes

“The House passed the Senate’s version of the $1.9 trillion covid relief bill, moving to President Joe Biden’s desk. Once he signs it on Friday, Uncle Sam will unleash funds that may lift not only the local but also the global economy. For both the Fed and the White House, policy depends on people getting back to work. Thursday’s weekly jobless claims will provide some hints.”

“ECB President Christine Lagarde has the power to push returns on debt lower – either by front-loading buys, or even expanding the bank’s current ‘envelope’ of €1.850 trillion. Will she inject new money into the ailing economies? That could boost the euro, but the slow-moving institution is unlikely to act with speed. All in all, there is room for disappointment.”  

“Some resistance awaits at the 50 SMA at around 1.1965. Last week’s swing low around 1.1990 defends the psychologically significant 1.20 level. Further above, 1.2025 and 1.2050 are eyed.”  

“Some support awaits at 1.1950, followed by 1.1925, which capped EUR/USD last week. It is followed by 1.1870 and 1.1836 – the 2021 bottom.”