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Forex Traiding

A new headache from the European Central Bank is clearing the way up for the euro. Pound ignores report



DATE OF PUBLICATION: 2021-02-23 15: 53: 02The European currency remained trading at the highs of this month and only slightly moved away from them. Not surprisingly, the European Central Bank is now much less concerned about the high rate of the European currency than about rising bond yields. During yesterday’s speech, the President of the European Central Bank Christine Lagarde said that she was “closely watching” the government bond market, not ruling out that she could take measures to prevent the growth of yields, undermining the economic recovery after the pandemic. Bond yields are rising globally as investors are betting on a coronavirus vaccine that will fuel larger global economic growth. In turn, this will lead to a surge in consumer spending and, accordingly, higher inflation and interest rates. And while this scenario implies increased investor interest in risk, which will help the economic recovery, it could also harm the pace of recovery due to the increased cost of financing the huge debt burden of the state. and the private sectors that piled up on balance sheets during the coronavirus pandemic. At her last meeting, the head of the European Central Bank pledged to maintain favorable financing conditions – i.e. zero interest rates until the crisis passes. Yields plunged after Lagarde’s speech, with 30-year German bonds down 6 basis points to 0.15%, up from -0.20% at the start of the year. However, later the growth resumed. A number of economists from large commercial banks agree with the position of the head of the ECB and are also convinced that higher long-term yields pose a greater risk for the ECB than too strong euro. Therefore, the control of the European currency rate as if by itself faded into the background, which leaves the door open for new highs in the EURUSD pair. The growth of the eurozone bond yields leaves the ECB no choice but to start buying public debt on its own through the emergency purchases program, which is now being carried out in links with the coronavirus pandemic. According to the latest data, the central bank is already gradually increasing the volume of bond purchases. Last week, he bought 17.2 billion euros under the current program, the highest since January 15. Today’s data on inflation in the euro area did not greatly excite the market, as expectations were in line with the forecasts of economists. According to EU data Eurostat, in January, eurozone consumer prices rose for the first time in six months. The EU-harmonized CPI rose 0.9% year on year, after falling 0.3% in December. A year earlier, inflation was at 1.4%. The data matched the forecasts of economists. In terms of core inflation, excluding energy, food, alcohol and tobacco, inflation accelerated to 1.4% from 0.2%. Compared to the previous month, consumer prices rose 0.2%, in line with preliminary estimates. The data on the growth of orders in the Italian industry did not interest traders much. In a report by the Istat Bureau of Statistics, industrial orders rose 1.7% in December, after falling 1.4% in November. Orders from the domestic market increased by 6.5%, while orders from the external market fell by 4.9% in December. As for the technical picture of the EURUSD pair, it has not changed much compared to the morning forecast. And although the euro has slightly lost ground, in general the balance remains on the side of the buyers of risky assets, who are one step away from the continuation of the bull market. To do this, they need to break above the resistance of 1.2180, which will lead to a new upward wave of the trading instrument in the area of ​​the highs of 1.2220 and 1.2260. You shouldn’t panic too much in case of a downward movement of the euro in the first half of the day, as the next major support level is seen in the area of ​​1.2135. But even if this area is broken down, one can also count on an increase in long positions around 1.2090. A recent COT report showed that long non-commercial positions rose 220,943 to 222,895, while short non-commercial positions rose from 80,721 to 82,899. As a result, the total non-commercial net position fell slightly after rising to 140,006 from 140,222 Weekly closing price of 1.2132 versus 1.2052 a week earlier indicating buyer presence in the market GBP The British pound as expected ignored the UK unemployment rate, which rose to a five-year high in the fourth quarter of 2020 … And although the British authorities are trying in every possible way to support the labor market, the coronavirus pandemic continues to make its own adjustments, putting pressure on the market. According to today’s Office for National Statistics data, the unemployment rate rose to 5.1%, the highest since 2016. At the same time, the employment rate dropped 0.3% qoq to 75.0%. The number of people looking for work has risen by 121,000. In a recent interview, the UK Treasury Secretary said he did everything he could to protect jobs during the crisis. Also, he said, in the budget to be presented next week, he will outline new measures to support jobs during the remainder of the coronavirus pandemic. The Office for National Statistics noted that there are already the first signs of stabilization of the labor market, which were observed at the end of last year. While unemployment is expected to continue to rise gradually throughout the remainder of this year, faster GDP growth in the second half of 2021 should prevent a sharp drop in the labor market. According to the latest forecasts, following the rollback of labor market support measures, official unemployment in the UK could reach the level of the global financial crisis of 8.4%. The data also showed that average earnings, including bonuses, increased by 4.7% at the end of 2020, which much higher than the expected figure of 4.1%. In January, the number of applications for unemployment benefits fell by 20,000. As for the technical picture of the GBPUSD pair, it has not changed much compared to the morning forecast. The bulls will try to protect the support at 1.4050, on which the further direction of the pair depends. If there will be no active purchases from the side of large players, then it is better to postpone long positions until the test of yesterday’s low of 1.3983. It will be possible to talk about the continuation of the bull market only after the breakout of the resistance at 1.4110, which will open a real prospect for the pair to strengthen in the area of ​​the highs of 1.4185 and 1.4240. As for the COT report: long non-commercial positions fell only to the level of 60 269 from 60 513. At the same time, short non-commercial positions fell from 39 395 to 38 102, which kept the bullish sentiment in the market. As a result, the non-profit net position rose to 22,167 from 21,118 a week earlier. The weekly closing price was 1.3914 against 1.3745. Material provided by InstaForex – www.instaforex.com Source – InstaForex

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