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EURUSD: euro bulls raise their sights

The EURUSD pair flatlined near the previous day’s close on Wednesday, April 21. The price action bounced from 1.1998 after the Bank of Canada signaled that it could start hiking rates in late 2022 and reduced the scope of its bond buying program. Canada’s central bank also sharply raised its economic outlook. In the upshot, the loonie strengthened by 74 pips against the USD to 1.2460. All major currencies took their cue from that move.

Today’s macro agenda (GMT+3)

  • 13:00 UK: CBI industrial trends orders (April)
  • 14:45 Eurozone: ECB interest rate decision; 15:30 ECB President Lagarde press briefing
  • 15:30 US: continuing jobless claims; Canada: new housing price index (March)
  • 17:00 US: existing home sales and index of leading indicators (March); Europe: CCI (April)

Current outlook

Following a 13-hour correction, the loonie continued to appreciate, with USDCAD sliding to 1.2473. The BoC's push to tighten monetary policy could be a harbinger for tapering by other central banks.

After the Canadian dollar rebounded, EURUSD recovered to 1.2045. Buyers look set to break out of the 1.2050 resistance level (45-degree angle), paving the way to 1.2080. Further upside is supported by dollar weakness against the loonie, as well as a decline in the 10-year UST yield to 1.531.

Dollar weakness is capped by surging Covid-19 cases in India and Japan, even as investors are wary of new lockdowns and outbreaks in other countries.

The technical picture on the hourly TF looks buyer-friendly, as the bulls may shrug off today’s rate decision and press conference by ECB President Christine Lagarde. The Fed is scheduled to meet next week. Neither the ECB nor the Fed is expected to signal a change in their policy stance. If the yield on US10Y falls below 1.525% the euro could climb to 1.2080.

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