Good day forex traders.
Welcome to another review of the popular currency pair EUR/USD.
In the previous forecast we noted on the consolidation of price action at the 1.18 region. A caution on sentiments was given and we were monitoring for further clues of momentum.
Looking at the weekly EUR/USD chart above we note that the currency pair is on a renewed push to establish itself at 1.2.
When we apply a long term approach to the momentum, we can see that the currency pair is in a steep bullish channel.
While many readers may be wondering why did the EUR/USD climb, it is not surprising. An article from Bloomberg sheds some light ”
The euro rallied to its highest since January 2015 as European Central Bank President Mario Draghi took a pass on talking down the common currency in remarks at the Jackson Hole economic symposium, clearing the way for bulls to keep buying.
The Bloomberg Dollar Spot index dropped to its lowest since January 2015 after Draghi’s remarks, before mildly paring losses. The greenback was lower versus all of its G-10 peers and Treasury yields were generally down on the day, after Federal Reserve Chair Janet Yellen also avoided discussion of monetary policy in an earlier speech. The afternoon Draghi speech and morning Yellen remarks would have disappointed any traders looking for the ECB chief to push back on gains by the euro or for the Fed chair to underscore the potential for another rate hike this year.
Draghi focused his published remarks on the risks of protectionism and said “openness to trade is under threat, and this means that policies aimed at answering this backlash are a vital part of the policy mix for dynamic growth.” In answering questions after his speech, he said the ECB has to “remain on guard” as it has yet to see sustained convergence of inflation to its goal, after which the euro retreated slightly
Yellen earlier called for modest regulatory reform to maintain financial stability. The closest she came to the economy was to acknowledge that “substantial progress has been made toward the Federal Reserve’s economic objectives of maximum employment and price stability” ”
Many investors were of the opinion that the respective central bankers from both sides of the Atlantic would caution on a strong euro currency affecting the growth of the Euro Zone and set the stage for another US dollar interest rate hike. Trade positions probably switched fast upon disappointment. This shows yet another example of sentiments at work.
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