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EURUSD TECHNICAL ANALYSIS
The currency pair trading within a triangle formation and bouncing off support at around the 1.2160 level while strong resistance can be seen at the 1.2520 price level.
The moving averages have started to go sideways and we are in a consolidation phase at the moment. Trades can be taken when price reaches the support and resistance levels as well as slanting lines that occur as the market progresses.
Swing traders might want to use the Stochastic tool to guide their entry in these type of market environment.
The MACD histogram is above the zero line and we can see that momentum is slowly dying out. There is a lack of energy in this pair as the market consolidates.
We are observing this pair and we remain neutral on this pair. We will initiate trade alerts and signals to the premium group through the Telegram app only when we see momentum picking up. If momentum is lacking, any trades we take might just get chopped up.
We are awaiting for the markets to come alive again on Tuesday as today major central banks are still on holiday.
EURUSD FUNDAMENTAL ANALYSIS
Italy President Mattarella is expected to start talks with political leaders in April before deciding who to nominate to lead the next government.
Coalition talks is expected to take up to several months. Some senior officials believe the deadline could be in July. However if we look at Germany’s situation, they took nearly 6 months to form a coalition government).
This could be a long drawn process. Such a situation can be cause of volatility for the EUR.
We do not rule out renewed talks of another election (another source of volatility weighing on EUR if it happens). But bias remains to buy on dips. we remain constructive of EUR outlook on:
(1) Receding political risks in Europe (Germany managed to form coalition government with Merkel elected as Chancellor again for the 4th term though Italy government formation remains a source of uncertainty).
(2) Sustained signs of economic recovery broadening in Europe, supported by private consumption, business sentiment, construction investment, sizeable current account surplus (3.5% of GDP) and export recovery.
(3) Signs of growing demand for EUR as a share of world FX reserves amid ongoing reserve diversification and
(4) ECB’s gradual pace of policy normalisation is expected to proceed as planned.
Though political uncertainty in Italy may pose downside pressures in the interim, this can be seen as an opportunity to buy EUR on dips.
We hope that you have benefited from this analysis.
Have a great trading day ahead!