Euro price forecast 28 April 2021 | EURUSD Fundamental analysis

2021-04-28 2021-04-28
EURUSD is playing catch. Forecast since 28.04.2021

Dmitri Demidenko

Slow vaccination in the EU and problems with ratification of the European Health Fund are seriously pressing EURUSD in the first quarter. However, the situation improves in the second quarter. In addition to the Fed’s passive stance, this circumstance supports the euro. Let’s discuss the Forex perspective and create a trading plan.

Weekly euro fundamental forecast

Expect the best, but be prepared for the worst. Is the market ready for the Fed’s optimism and Jerome Powell’s hints about monetary policy normalization? I strongly doubt it. The central bank has convinced investors of its willingness to tolerate high inflation and maintain monetary stimulus. Consequently, the treasury yield fell to a six-week low. Now U.S. bond yields are growing again, encouraging the EURUSD bears.

Ahead of the results of an FOMC April meeting, the euro dollar was locked in a narrow trading range of 1.2055-1.211. Investors are sure they know what Jerome Powell will say, but what if something goes wrong? One wrong sentence can result in turmoil in financial markets. The Fed chairman has to acknowledge that economic growth is accelerating, but unemployment is still too high. Powell has to say this is a rebound, but not yet a recovery. The U.S. economy has not yet recovered from the pandemic.

There are hardly any chances that the Fed President will talk about a QE decline in April. First, the Fed does not want to repeat the 2013 outrage when Ben Bernanke announced the reduction in the volume of asset purchases and caused a real panic in the financial markets. Second, the Fed is traditionally less aggressive than the CME derivatives or Bloomberg experts. Most of the latter expect the $ 120-billion program to end in the fourth quarter.

Economists ’forecasts of the conditions of QE decline

Source: Bloomberg

Despite the improvement in the U.S. economic situation, there are still many problems, and the central bank may allow for patience. However, if inflation is to be up 3.5% in May-June amid high commodity prices, the best GDP growth over the past four decades and the huge delayed demand, the Fed will have to take active steps. Finally, according to PIMCO, the U.S. PMI will slow in the third and fourth quarters, which along with resolving supply problems will return the CPI to 2.1% by the end of 2021. It looks like the best way out for the Fed is to be expected and see not to make the situation worse. Let the Treasury yields grow along with the PMI!

PMI Treasury Dynamics gives and global PMI

Source: Nordic Markets

I don’t think the treasury yield will accumulate the EURUSD bulls as much as in March. French Finance Minister Bruno Le Maire warns that the EU must stay in the race while China resumes its growth and the US explodes. EU governments have lost too much time in adopting the European Recovery Plan. The eurozone needs to recover.

Weekly EURUSD business plan

Playing recovery now is not the same as in the first quarter, when the euro crashed amid the slow vaccination and the double dip recession in the euro area. Even if the EURUSD, breaking the lower edge of the short-term consolidation range of 1.2055-1.211, begins to correct downwards, it will be important to buy the pair on the bounce up of the supports at 1.2045, 1.2 and 1.1965.

EURUSD price chart in real-time mode