Daily Market Recap - EURUSD Reversal taking shape

The EURUSD is starting the week slightly higher as traders will be paying attention to economic data, including US inflation figures expected on Tuesday.

The euro, which has been falling sharply against the dollar since the beginning of the year, has nevertheless strengthened since the beginning of the month.

The greenback thwarted the predictions of a sharp decline that had multiplied at the end of 2020 with the prospect of a deepening of the U.S. deficits.

The dollar has therefore recorded its best first quarter since 2015. In contrast, the euro has lost nearly 4% of its value in three months with the deterioration of the recovery outlook and the growing economic gap between the eurozone and the US.

In addition, the President of the U.S. Central Bank Jerome Powell estimated Sunday in an interview that the U.S. economy was “at an inflection point”, with a marked rebound in growth and employment to come in the coming months.

The Fed has promised to keep monetary policy loose to help the recovery, but many market participants believe that the recovery will be so rapid that inflation could spiral out of control, forcing the institution to raise its key rates.

Graphically, the EURUSD has managed to rise above $1.18739. This resistance turned support level is also reinforced by the support of the 200-period moving average. Thus, buyers need to defend this key level to avoid a return to the lower bound of the long-term channel around $1.1770.

In the short term, the euro is still locked in a bearish channel (parallel range on the weekly chart). As such, a breach of $1.2050 would reinforce the upcoming bullish recovery scenario. The pair could therefore begin a new wave of bullishness. A break of $1.2050 would lead to an acceleration towards $1.2180 and then towards the former highs.

(Chart Source: Tradingview 12.04.2021)

On the other hand, the warning signal for sellers would be a break below $1.1710. This would not bode well for the future and the market would risk a reversal of the trend with a return to around $1.1500.

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.