The Euro has seen the bottom fall out, especially against the USD as the deviation in policy between the two representative Central Banks has yet to settle. The Fed is hard set and fast on hiking while the ECB, well, they’re the ECB, and have been typically dovish. The Bank of Japan hasn’t been very hawkish either, as USD/JPY has ascended to 20-year-highs.
Taking a step back to look at the US Dollar with some scope highlights just how incredibly important the current zone of resistance is. This is the same area that caught a reversal in 2016/2017. It’s also the same zone that came into play during the pandemic panic in March of 2020. This is a tough area for the USD, as is, but if we consider how quickly it came into play over the past 11 months, and there’s more reason for caution on continuation approaches.
The outlook for the Euro pair still points to the bearish side, always in response to US dollar dynamics, geopolitical concerns, and the Fed-ECB deviation. Occasional pockets of strength in the single currency, in the meantime, should appear reinforced by speculation the ECB could raise rates at some point in the summer, while higher German yields, elevated inflation and a decent pace of the economic recovery in the region are also supportive of an improvement in the mood around the euro.
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