Europe's lockdown continues. How long can the strong EUR last?

After the euro/dollar fell to the lowest level since 2017 at 1.0635 in March last year, it rebounded. The highest level in January of this year has risen to 1.2214. It is currently in a callback phase, not far from the highest level since the beginning of 2018. If EUR/USD has gone through a cycle of nearly ten years and experienced the high point of 1.6038 touched in 2008 and the low point of 1.0339 in 2017, using the gold cutting rate to judge, the 38.2% level is exactly 1.2523. If it can break through the resistance level , The future rally is just around the corner.

Affected by the raging new coronavirus (COVID-19) last year, the European Central Bank launched a new economic stimulus package in the last month, expanding the purchase of emergency bonds by 500 billion euros, and did not promise to use all 1.85 trillion euros in pandemic emergency assets The purchase plan (PEPP) quota, the news stimulated the euro upward.

According to the record of the European Central Bank’s policy meeting in December last year, Europe’s real gross domestic product (GDP) should probably return to pre-COVID-19 levels by mid-2022, and there are positive signs of inflation. The ECB closely tracks a long-term measure The key indicator of inflation expectations in the euro zone is close to an 18-month high, which has also brought momentum to the rise of the euro.

In the new year, the number of COVID-19 cases continues to increase. Countries such as Germany and France have implemented new anti-epidemic measures, and the slow pace of vaccination on the market has raised doubts about the pace of economic recovery in the Eurozone. In this regard, Central Bank President Lagarde believes that as long as the epidemic prevention blockade can be lifted before the end of March, plus vaccination, the euro zone economy will rebound this year.

The dollar will continue to weaken

FXStreet analyst Yohay Elam said: "U.S. President Biden continues to advance his proposed $1.9 trillion stimulus plan. If Biden receives a smaller stimulus plan or any delay, the prospects for lower growth and reduced debt issuance will prompt investors. Return to the bond market. Falling yields will weaken the attractiveness of the U.S. dollar."

In addition, the minutes of the Fed meeting show that the central bank is optimistic about the prospects for US economic growth in 2021 and is more optimistic than before. However, the Fed seems indifferent to all the talk about rising inflation, and it is unlikely to raise interest rates or shrink its bond purchase program. In this case, the dollar may still be under pressure.

Although retail sales in the United States rose 5.3% in January, much higher than expected, triggering the recent decline in the euro against the dollar. However, Yohay Elam believes that the unemployment rate in the United States is still high, and about 10 million Americans are still unemployed. "The number of people applying for unemployment benefits each week reminds us that the US economy is still struggling." As long as the US economy is not worth anything, the weaker dollar will benefit the euro.