Despite all the attempts of Mario Draghi to drown the euro, EUR/USD bulls managed to finish the second week of April in the green zone. The vulnerability of the main competitor and positive news from China's inflation and the trade balance, as well as from European industrial production, allowed the main currency pair to consolidate above the base of the 13th figure. Buyers do not intend to stop, hinting that it is time to put an end to the upward trend in the USD index.
At a time when the US economy slows down and the Fed intends to keep the federal funds rate at least until the end of 2019 (according to a consensus assessment of the Wall Street Journal experts, it will not change until 2021), practically nothing depends on the US dollar. It is forced to go with the flow and react to the behavior of other currencies and central banks. In order to resume the normalization cycle, the Fed needs very strong statistics. And how to get it, if the effect of the fiscal stimulus disappears, and the IMF predicts a decline in US GDP growth rates to 2.3% (the Fed forecast + 2.1%). The White House still believes in magical + 3%, but this requires either a new tax reform, or a reanimation of QE, or a weak dollar. The latter option is perhaps the most realistic for Donald Trump, which reduces the risks of a large-scale trade war between the US and the EU because in this situation the USD index will go up again.
For a long time, "American" were afraid to sell because of the weakness of its competitors. Nevertheless, a positive from European business activity and industrial production returned interest in buying EUR/USD. If the economy of the currency bloc groped for the bottom, and the Chinese data would stretch a helping hand to it, then why not increase the share of the euro in investment portfolios? In this regard, the release of data on the GDP of China for the first quarter and for the indexes of purchasing managers in the eurozone in April can disperse the upward movement of the main currency pair. Unless, of course, there are no unpleasant surprises.
Dynamics of European business activity and GDP
One of them may come from the States, which intend to impose duties on imports of aircraft and other goods from the EU due to non-market subsidies to Airbus. There are rumors in the market about the start of a new trade war, but in fact, in this way, Donald Trump may push Brussels to negotiate the abolition of tariffs on industrial goods. If the parties agree, this will improve the position of international trade, and in fact, its slowdown, according to the IMF, has become the main brake on global GDP. The authoritative organization lowered the forecasts for economic growth in the eurozone from 1.6% to 1.3% in 2019, however, as often happens, the worse the estimate, the more reasons for joy if it is exceeded.
Technically, the second false breakdown of the lower limit of the medium-term consolidation range of 1.125-1.15 testifies to the weakness of the "bears" in EUR/USD. If the opponents manage to return the quotes to the middle of the trading channel and activate, thus, the "Deception-Release" pattern, the risks of continuing the rally in the direction of the "Wolfe waves" target will increase.
The material has been provided by InstaForex Company - www.instaforex.com