The EUR/USD has strengthened its rally, up where the pair can it come up?

© O Financista.

By David Wagner

The EUR/USD starts the week with a new wave of increase, with a rebound that now exceeds 300 pips since the low annual 1.0777 of 20 February, with a peak at 1.1082 this Monday morning.

Like last week, the main factor at the origin of the increase of the EUR/USD is the weakness of the Dollar, which suffers a dramatic increase in expectations of rate cut from the Fed, the market being almost certain that the Fed will lower rates at its next meeting on 18 march, possibly to 0.50% from 0.25%, most of the time when the Fed reduces its rate.

The coronavirus installs into effect in the United States, with more and more cases, and now both dead, and that has led to the chairman of the Fed Jerome Powell has released a statement last Friday in which he described the coronavirus of evolutionary risk, ensuring that the Fed will do what is necessary in case of need, which has clearly reinforced expectations of a rate cut.

From a technical point of view, it should be noted that the EUR/USD has crossed this morning its moving average of 100 days, which is an important bullish signal. However, the psychological threshold of 1.11, coupled to the 200-day moving average which lies on the same line a few pips near, might block the progression at this stage.

It is all the more true as the expectations of lower Fed funds rate now have little margin for progressing further, and the ECB is also likely to lower its rates.

It seems very prudent at this stage to try to take the train of the increase in walking on the Euro-Dollar.

If a correction takes place, the moving average 100 days crossed this morning at 1.1048, will be the first medium before the psychological threshold key 1.10.

Finally, it should be noted that apart from the coronavirus and expectations of monetary policy, traders will need to consider a economic calendar, which will be the occasion of several key event. We will have to wait, for example, today the ISM manufacturing index US for the month of February at 16h.

However, the most important event of the week will be the ADP report (AP:ADP) employment US in the month of February, Friday at 14: 30.

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