Analyzing the consequences of the temporary cessation of the work of the US government, investors reacted with restraint to the news that on Sunday the senators did not agree on voting for the bill on financing the government for one month. Pause in the work of the US government is unlikely to become a threat to the global economy, however, the major US stock indices and the dollar are moderately declining on Monday.
Last week, the dollar index DXY reached a multi-month low near the mark of 90.15, and today DXY again decreases, being at the beginning of the European session near the 90.20 mark. Meanwhile, the yield on 10-year US Treasury bonds grew on Monday to 2.651% from Friday's level of 2.639%, which was the maximum for the end of the session since July 2014. The dollar receives support from the growth of yield on US bonds, restrainedly declining in the foreign exchange market, even on an unfavorable domestic political background in the United States.
Meanwhile, as it became known from media reports, on Sunday the Social Democratic Party of Germany, which adheres to the center-left views, agreed to negotiations with the conservative bloc of Angela Merkel on the creation of a coalition. Thus, the domestic political situation in Germany, whose economy is leading in Europe and the Eurozone, has improved, and Merkel overcame a key obstacle in an attempt to form the government for the fourth time.
Thus, the EUR / USD is receiving double support today and is growing again at the beginning of the European session after the pair opened today's trading day with a gap up, reaching 1.2268.
The focus of investors who trade the euro will be the ECB meeting on monetary policy, which will be held on Thursday. Also this week is expected a large amount of macro data on the economy of the Eurozone. On Tuesday (10:00 GMT), the ZEW Research Institute will release a January report on business sentiment and expectations in Germany. On Wednesday, PMI (preliminary release) indices for the manufacturing and service sectors of France, Germany and the Eurozone will be published. On Thursday, the indices GfK and Ifo of the sentiment in the economy of Germany will be published. On the same day, at 12:45 (GMT), the ECB's interest rate decision will be published. It is expected that the current monetary policy of the ECB will remain unchanged, and ECB President Mario Draghi will favor the preservation of a soft monetary policy. The press conference of the ECB will begin on Thursday at 13:30 (GMT). On Friday, investors will be waiting for data on consumer confidence and business sentiment in France, as well as data on the euro money supply M3 and consumer lending (08:00 GMT). Thus, a very volatile trading week is expected.
Meanwhile, the EUR/USD keeps positive dynamics, trading in the zone of multi-month highs, above the important support level of 1.2200, which corresponds to the Fibonacci level 50% of correction to the fall from the level of 1.3900, which began in May 2014.
*)An advanced fundamental analysis is available on the Tifia Forex Broker website at tifia.com/analytics
Support levels: 1.2200, 1.2100, 1.2060,
1.2000, 1.1900, 1.1855, 1.1790, 1.1735, 1.1680, 1.1630
Resistance levels: 1.2300, 1.2320, 1.2430, 1.2600
Trading Scenarios
Sell Stop 1.2190. Stop-Loss 1.2290. Take-Profit 1.2100, 1.2060, 1.2000, 1.1900, 1.1855, 1.1790, 1.1735, 1.1680, 1.1630
Buy Stop 1.2290. Stop-Loss 1.2190. Take-Profit 1.2320, 1.2430, 1.2600
*) For up-to-date and detailed analytics and news on the forex market visit Tifia Forex Broker website tifia.com
