EUR/USD: Midweek Review – Next Stop 1.10?

The EUR/USD continues rising inside an ascending channel which began at the December lows.

This is the seventh consecutive week of gains for the pair, showing that a strong short-term uptrend is in play.

The pair has now reach sturdy resistance at 1.0815 from the R1 monthly pivot and it may pause or pull-back at this level since it is a favoured place for traders to short the exchange rate.

If it manages to clear the level, however, by rising above 1.0850, it will probably extend all the way up to the next target at the key psychological 1.1000 level.

The uptrend is further supported by the constructive MACD which is above the zero-line and therefore indicative of an uptrend.

Polemics in Charge

The single currency received a boost on Tuesday from higher-than-expected Eurozone inflation data and a fall in the unemployment rate which supported the view that the region is extending its steady recovery.

However, it seems politics is pushing the rate higher now as US President Donald Trump and his advisers home-in on currencies as a key factor in the success of his protectionist trade policies.

Trump has said the Dollar is too strong several times since he was elected and most recently his trade adviser Navarro railed against the Euro’s weakness and criticised Germany for using the currency to serve its own trade interests.

This suggests the White House is likely to enact increasing Dollar negative policies which could see gains for the currency offset in the future.

After a recent meeting with major pharmaceutical companies to discuss repatriating drug manufacturing processes, Trump’s team said that currency devaluation was a major reason for the offshore outsourcing of pharma production.

Again this seems to further support the view that Trump may start to train his sights on the Dollar and attempt to devalue it, although given the Federal Reserve’s independence it’s difficult to see how he could impact the currency very much.