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EURUSD: euro holds above 1.18 due to EURGBP cross rally

The EURUSD pair rose 0.54% to 1.1878 by the end of trading on Tuesday, April 6. The euro rally sparked a sell-off in sterling amid claims by European drug regulator EMA that there is indeed a link between blood clots and the coronavirus vaccine manufactured by AstraZeneca. After this news, the EURGBP cross jumped 97 pips (+1.14%) to 0.8589. On Wednesday, the euro retraced to yesterday's high against the pound at 0.8624. Euro buying was also stoked by a decline in UST yields. The 10-year Treasury yield fell 3.42% to 1.647%. In the upshot, the market immediately forgot about lockdowns across the EU.

Today’s macro agenda (GMT+3)

  • This morning, services PMIs are due out in Spain, Italy, France, Germany, the Eurozone and the UK
  • 15:30 US and Canada: trade balance (February)
  • 17:00 Canada: Ivey PMI (March)
  • 17:30 US: EIA weekly petroleum status report
  • 21:00 US: FOMC minutes
  • 22:00 US: consumer credit change (February)
1

Current outlook

Major currencies are trading in the red this morning, with the exception of the Swiss franc and the euro. The largest losses are seen in the Canadian dollar (-0.33%) and the pound (-0.24%). The single currency is gaining from a rise in the EURGBP pair. Accordingly, sterling remains under strong pressure for this reason.

As regards the key events for today, we note the EU business activity indices, as well as the FOMC minutes. Euro crosses will support the euro throughout the day, but keep in mind that restrictions will be lifted in the UK from April 12. Market sentiment could shift at any point in time. Moreover, the EURGBP cross rose by 152 pips in 44 hours to 0.8624 and reached a key resistance level. Growth in the pair could slow down or even stop for 10-15 hours.

Support for the euro should kick in at 1.1855. If the correction in the cross intensifies, then we expect the euro to fall to 1.1855. Players should now watch in the EURGBP pair for the 0.8592 level. A drop in the price action below this level could lead to a change in sentiment toward the GBPUSD pair. This pair dropped to 1.3772, and the current rate is 1.3792. The 1.3757-1.3768 range denotes strong support. Consolidation above this range should be read as a rebound signal.

 

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