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The pair EUR/USD has sharply aggravated its dip yesterday, marking a new low in annual 1.0930, the lowest since may 12, 2017, there are more than 2 years.
Recall that the Euro-Dollar falling almost continuously since the beginning of last week.
However, if the fall of the Euro last week could be explained by a strengthening of the Dollar, which benefited from a relative easing of relations China-USA, this is not the case this week.
The Dollar has certainly continued to advance, but without further improvement in the outlook for the trade war between the two biggest economies in the world.
Worse, Bloomberg revealed yesterday that China and the United States are struggling to agree on a meeting in the month of September, while the prospect of these discussions face-to-face had excited the markets last week.
The market turns its attention to the ECB
If the Euro continues to weaken this week, so it may be that the market turns its attention to the ECB, which is expected as the Fed to ease its monetary policy in the month of September.
In this regard, it should be noted that the money markets of the euro zone now incorporate a 60% probability of a decrease of 0.20% of the deposit rate of the european central Bank (ECB) at its next monetary policy meeting, which would exceed economists ‘ expectations if confirmed.
That will show the more dovish? The Fed or the ECB?
Over the next few weeks, the evolution of the Euro-Dollar will therefore depend to a large part of which will be the most dovish : The Fed or the ECB. If it is the ECB, the decline of the EUR/USD is expected to continue.
But if the Fed accesses finally applications of Trump by lowering sharply its rates, the Euro could rise, to the extent that the Fed has much more leeway than the ECB to loosen its monetary policy.
A monitor in the economic calendar of the day
In the short term, the economic calendar Tuesday will offer some opportunities to see the volatility increase.
This morning, it is the index of producer prices of the euro area that will need to be monitored. The consensus is for a PPI at 0.2% in annual data, after 0.7% the previous month.
In the after-noon in the United States, will be monitored first of all the second estimate of the manufacturing PMI at 15: 45, but it is especially the ISM manufacturing index is expected to 16h that could influence trade.
It should show a very slight decrease to 51.1 points after 51.2 in the previous month, according to consensus forecasts.
Technical update EUR/USD
Finally, from a graphical point of view, it should be noted that the recent low of 1.0930 and the psychological threshold of 1.09 are the first two carriers to take into account.
The increase, 1.0950 is to be regarded as immediate resistance before the psychological threshold key 1.10. However, a return to the top of 1.11 appears to be necessary to start to seriously question the bearish view of the bottom.