Eurozone Economy Still on “Two Crutches”
by Bogdan Giulvezan
Speaking at an event last Wednesday, European Central Bank President Christine Lagarde warned that the bloc’s economy is still reliant on what she referred to as “two crutches”: monetary and fiscal stimulus.
On that note, the EUR/USD is testing the resistance at 1.1970 – 1.2000 and has crept above the 50 days Moving Average but all eyes this week will be on the ECB Press Conference and President Lagarde’s stance. Although the consensus is that the ECB President will be dovish, there is still the risk of her being less so, or even a bit hawkish, which would stir the pot of volatility in all Euro-related pairs. With that being said, let’s see what else we have on the economic calendar “menu”.
Key Events for the Week Ahead
The first couple of days of the coming week will be relatively uneventful but the action picks up Wednesday, April 21 when the British Consumer Price Index (CPI) comes out. This is one of the main gauges of inflation and is closely monitored by the BOE when deciding where to set the interest rate; thus a bigger change than the expected 0.8% will likely strengthen the Pound. The release is scheduled at 6:00 am GMT.
Thursday, April 22 at 11:45 am GMT, the ECB will release the Monetary Policy Statement, which contains the interest rate decision and details about the reasons that influenced it. The rate is currently set at 0.00% and no change is expected. Shortly after, at 12:30 pm GMT, the usual Press Conference takes place and ECB President Lagarde will read a prepared statement, followed by a Q&A session. This second part of the presser is usually the most anticipated, but also the main volatility generator, depending on the President’s answers and attitude. Caution is always recommended during such events.
Friday the EU will release a series of Services and Manufacturing PMIs, which are generally regarded as indicators of economic health, but the impact is not huge unless surprises happen and the numbers differ a lot from the forecast.
EUR/USD Chart Analysis
The pair is currently trading just above the key level at 1.2000 and it looks like the bulls have managed to break above the 50 MA and 1.1970 resistance. However, there is still a bearish trend line that may hinder further advances, but if this barrier is broken, the buyers will solidify their control.
The medium-term bias favors the US Dollar but from a shorter-term perspective, the Euro bulls are in control, aiming for the next big round number (1.2100), if the bearish trend line is surpassed. Keep in mind that the last daily candle is not closed at the time of writing and if the day ends with a long wick, it will show rejection at resistance, which is a sign that the sellers may push price back below the 50 MA.