- EUR / USD has rallied back to 1.1800 from initial levels below 1.1750.
- The pair is being driven by widespread USD weakness, which comes despite strong US data release.
The EUR/USD It has been firmly in the lead for the past few hours, rebounding from below 1.1750 before the arrival of US market participants to current levels around 1.1800. The rally appears to have come hand in hand with a broad weakening of the US dollar against most of its major counterparts.
Having recovered back to 1.1800 and reached highs above 1.1810, the pair is now trading near its highest levels since not last Thursday but the previous Thursday (March 25). On the upside, resistance kicks in at the 1.1830-1.1850 region in the form of the March 8 low (at 1.1835) and the 21-day moving average (at 1.1855). The EUR/USD it is currently trading with daily gains of about 0.4% or nearly 50 pips.
Performance of the day
As noted above, dollar weakness is the dominant factor in currency markets this Monday and the latest PMI survey from the US Supply Management Services Institute stronger than anticipated (for the month of March ) doesn’t seem to be doing the dollar any favors. For reference, the overall PMI number was 63.7, above expectations for an increase of 55.3; The strong services PMI number comes on the back of an equally strong manufacturing PMI number last week, as well as a much higher-than-anticipated NFP number for the month of March released on Friday.
In other words, the March data so far has been very strong and continues to fuel the narrative that the US economy continues to recover and at a seemingly accelerating rate. The rate of this recovery is likely to accelerate as virus infection rates decline as the US enters the summer, allowing for accelerated reopening. Going back to Monday’s ISM services report; the sub-indices were also strong, with new orders rising to 67.2 from 51.9 the previous month, with employment rising to 57.2 from 52.7 last month and prices paid rising to 74 from 71.8.
While the recent string of strong level one data releases since last Thursday has weighed on the US Dollar, some market analysts / commentators expect this weakness to reverse soon. Strong data has pushed US government bond yields up.Meanwhile, the increased risk that is being seen in the US equity markets right now (the S&P 500 is trading at 4,075, up 1.3% on the day) could be negative for safe-haven assets (of which the USD is generally considered one), but the fact that the rally is being driven by expectations of US economic strength. The US could well limit the associated decline in the USD.
In fact, the USD typically performs well when the US economy outperforms its international counterparts, regardless of the market’s broader risk appetite, and that’s certainly the case right now; Europe and other major economies (such as India) are facing a rising tide of Covid-19 infections and new lockdowns, while the US continues to return to normal. As long as the “American exceptionalism” narrative continues, the USD bulls are likely to remain confident; Some technical analysts have been talking about USD bulls waiting for the Dollar Index (DXY) to return to its 200 DMA just below 92.50 before increasing their long positions. With the DXY just above this level again, buying interest is likely to increase.
Looking ahead, the Fed will return to the limelight this week as the dollar’s main driver, with a focus on Fed speakers including Chairman Jerome Powell (speaking Thursday) and will focus on the release. of the minutes of the March FOMC meeting on Wednesday.