The euro-dollar pair continues to test local highs due to the growing geopolitical situation in the world, the "hawkish" statements of the ECB representatives and contradictory US statistics. The US dollar is under pressure, but it does not cheaper at all in pairs. For example, in pairing with the franc or the Canadian dollar, the American feels confident so far, despite the pressure of the fundamental background.
However, paired with the European currency, the dollar is clearly losing ground. The rhetoric of the members of the European Central Bank has recently become much tougher, so the pair EUR / USD is growing not only due to the weakening of the greenback. The latest data from European inflation returned optimism to the market regarding the QE completion soon, as well as hypothetical hopes for tightening monetary policy next year.
The starting point of the strengthening of the euro was the statement of the member of the ECB (chairman of the Central Bank of Austria) Ewald Nowotny, who called for the normalization of monetary policy in Europe. The member of the ECB Governing Council, Ardo Hansson, also toughened his position. In his opinion, the strengthening of the EU economy will inevitably accelerate the growth of inflation indicators. Indirectly, the position of his colleagues was shared by Mario Draghi, speaking today at a student conference in Germany. He optimistically assessed the current situation in the economy of the eurozone, from which it expects only further growth. In his opinion, the level of salaries and, accordingly, inflation will also demonstrate a positive trend this year. And although Draghi did not directly address the topic of QE and interest rates, the tone of the speech speaks of his readiness for decisive action, at least as far as the completion of the stimulating program.
Thus, the European currency enjoys indirect support from the ECB against the backdrop of the rebound in March inflation and a drop in unemployment to a record low of 8.5%. In this context, traders need to pay attention to the protocol of the last meeting of the European Central Bank, which will be published tomorrow. If the doubting members of the regulator join the obvious "hawks", the euro will receive some support. The probability of completion of QE this fall will increase.
But the American currency still can not find a reliable point of support. The published data on inflation caused contradictory reaction among traders. On the one hand, Core CPI came out on the forecast level, demonstrating stagnation on a monthly basis, and minimal growth in annual terms. However, the Consumer Price Index disappointed. On a monthly basis, the indicator collapsed into the negative area (-0.1%), not reaching the forecast zero level. In annual terms, growth was registered up to 2.4%.
As we see, inflation continues to be a weak link in the US economy. The ambiguous report on the labor market and the inexpressive growth of wages only supplement the overall picture. Such dynamics will allow the Fed to gradually tighten monetary policy, but it is unlikely that the regulator will decide to reconsider its base scenario for the current year. The chances of accelerating the rate increase rate melt with each published report and today's release were no exception.
However, the macroeconomy on the priority of influence today is inferior to geopolitics. The world press discusses the growing tensions around Syria and the possible consequences of another escalation. Trump, without any diplomatic caution, publishes threatening tweets about "smart" weapons, and Russia, in turn, promises to shoot down missiles fired at Syria. In one of his current tweets, Donald Trump admitted that the current relationship between the US and Russia is "worse than during the Cold War." Given the fact that it is a question of two nuclear powers, it is difficult to predict the outcome of a hypothetical bilateral conflict. Against this background, defensive assets (especially gold and yen) have traditionally become in demand. They joined the European currency, spurred by the "hawkish" comments of ECB representatives.
Thus, American inflation could not support the dollar, especially against the backdrop of the unfolding events in Syria. The European currency, in turn, enjoys support from the ECB, March inflation, and general demand. All this suggests that in the near future the pair EUR / USD will continue to storm the price highs this year.
This perspective is confirmed by the technical picture of the pair. On the daily chart Ichimoku indicator Kinko Hyo formed one of its strongest signals, a bullish "Line Parade". In addition, the pair is above the Kumo cloud and between the middle and top lines of the Bollinger Bands indicator.
All this points to the priority of the northern movement. The support level is the middle line of the Bollinger Bands indicator (which coincides with the upper boundary of the Kumo cloud) and the 1.2320 mark. But the resistance level is the upper line of this indicator and the price is 1.2425. If the bulls overcome this price barrier, the pair will aim at the next resistance level of 1.2610 - this is the top line of the Bollinger Bands indicator on the weekly chart.
