Market Update – March 29, 2018

Market Update – March 29, 2018

The Catholic world celebrates Easter this week, and this means the end of the week trading sees many bank holidays. For this reason, the last day of the trading month might be less volatile than normal.

 

But the trading week had plenty of price action, especially on the EURUSD pair. The pair disappointed again.

 

Last Friday it acted in a bullish manner, trading with little or no pullbacks, and closed around 1.2370. From this Monday’s opening, the pair shot higher, and by the time the London session started on Tuesday, the pair printed 1.2480.

 

However, it was only another fake move, one of the many the pair did lately. As a matter of fact, the entire 2018 saw the pair moving in a range.

 

The 1.22-1.25 area proves to be difficult to break for both bulls and bears. Swing traders had plenty of opportunities to profit from this range: bears that sold above 1.24 or bulls that bough below 1.23 enjoyed nice profits.

 

Yet, the pair will clear the range. It may take some time still, but when the range ends, all eyes will be on the new trend’s strength and what it’ll mean for the Euro.

 

Monetary Policies Divergence

 

While the Federal Reserve of the United States keeps tightening, delivering last week another rate hike, the ECB is in no rush of moving the rates from negative territory. However, the Euro is resilient to fall.

 

The majority of traders see the EURUSD collapsing to parity and below, especially because of the monetary policies divergence explained above. Yet, the Euro holds the grounds on many pairs.

 

The USD, on the other hand, drifts with the Trump administration’s decisions. No one knows exactly how the trade deals will affect the twin deficit or the real effect of the tax reform.

 

If anything, traders are thankful that the equity market swings brought opportunities for both bulls and bears. However, if one puts the current correction in the general context, the swings are nothing but…a correction.

 

The GDP the other day showed the United States economy is in a better shape than many believed, with growth a little shy of the 3% mark. If next week’s NFP and ISM data confirms the better than expected GDP number, the Fed will have ammunition to raise rates again.

 

Conclusion

 

Despite the interest rate gap increasing, the Euro is resilient and the path of least resistance still seems to be on the upside. The recent gains were seen against the commodity currencies (CAD, AUD) may just be the beginning of another leg higher for the common currency, as hedge funds managers try to diversify a portfolio.

 

If that’s the case, 1.30 on the EURUSD pair and 140 on the EURJPY aren’t values to scare anyone, anymore.


Also published on Medium.

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