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The euro rose amid a sharp improvement in the business community earlier this year. Germany seriously intends to extend the quarantine



DATE OF PUBLICATION: 2021-01-19 15:18:19 The European currency strengthened its position against the US dollar after quite startling reports on the sentiment of business circles in Germany and the eurozone. The data turned out to be much better than the forecasts of economists and exceeded all expectations. But before talking about the numbers and the future prospects for the EURUSD movement, I would like to briefly touch on the topic that will continue to limit the growth potential of risky assets: the coronavirus, news of which has become commonplace over the past year. Today German Chancellor Angela Merkel she reiterated that she would negotiate a possible extension of quarantine measures in the country and would insist on the introduction of a curfew. European Union member states are expected to be alerted today that the measures they are taking to contain the coronavirus pandemic are clearly not enough. The risk is a new strain with no vaccine yet. EU Health Commissioner Stella Kyriakides told EU Parliament that the bloc is still far from defeating the pandemic. According to the latest data, the EU has not yet reached a plateau in terms of the number of infections. Still, Kyriakides said there is “light at the end of the tunnel,” as things will get much better with two vaccines approved by the EU and a third that is about to be approved. It was also reported today that Hong Kong authorities are tightening social security measures. distancing and introduce special restrictions in certain areas in which the maximum number of cases of the disease is recorded. Travel bans have been imposed on travelers from Ireland and Brazil. Meanwhile, the new administration of President-elect Joe Biden has rejected President Donald Trump’s proposal to lift the travel bans for EU, UK and Brazilian citizens. Japan has confirmed three patients have tested positive for the new coronavirus which was first discovered in the UK. Importantly, the infected people did not visit the UK. Now regarding the statistics, which led to such a sharp rise in the European currency in the morning. The data on inflation in Germany did not affect the market, as they coincided with the forecasts of economists. The Destatis report indicated that Germany’s annual consumer price index was down 0.3% in December 2020, the same as in November. Energy prices fell immediately by 6.0%, which led to a fall for the second month in a row. Excluding energy prices, core inflation rose 0.4%. The fall in prices was also observed for clothing and footwear by 5.4%, while the cost of communication fell immediately by 3.4%. Prices rose in restaurants and hotels, as well as for alcoholic beverages and tobacco. On a monthly basis, consumer prices rose 0.5% in December 2020, in line with economists’ forecasts and initial estimates. The EU-harmonized consumer price index fell 0.7% year on year. Compared to November, the index rose 0.6%. The biggest impact on risky assets came from today’s report from the Center for European Economic Research named after Leibniz, which pointed to an increase in business sentiment in Germany. Despite uncertainty over whether the quarantine will continue, sentiment has skyrocketed, according to the data. Thus, the ZEW economic sentiment indicator in January rose to 61.8 points and exceeded the forecast of economists who had expected the index to be at 60 points. The current situation index also rose slightly from negative to -66.4 points from -66.5 point in December. The index was forecast to fall to -68.5 points. The ZEW noted that export expectations rose significantly over the coming months. As for the overall eurozone report, the rise in the index also came as a surprise. According to the data, the indicator of economic sentiment from the ZEW in the euro zone in January 2021 rose to 58.3 points against 54.4 points in December. A sharp decline in the indicator was expected. The growth was predicated on new financial conditions that would help support businesses and companies, which would lead to an accelerated economic recovery from the pandemic. The data on the current account surplus of the European Central Bank’s balance of payments was of little concern except for economists. According to the data, the surplus fell to € 25 billion in November 2020 from € 26 billion in October. For the same period last year, the surplus amounted to 24 billion euros. As for the technical picture of the EURUSD pair, the bulls are clearly inclined to break out and consolidate above the resistance 1.2140, which they came close to in the morning. As I noted earlier, a confident breakout of this area will lead to a reversal of the downtrend, which will only strengthen the upward correction in risky assets. In this scenario, highs open around 1.2180 and 1.2220. If the pressure on the euro returns in the afternoon, the bears will need to put in a lot of effort to break and consolidate below the bottom of the 21st figure. Only a breakthrough of this area will quickly bring the euro down to a minimum of 1.2060 and allow counting on its renewal around 1.1990. Material provided by InstaForex – www.instaforex.com Source – InstaForex

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