Euro Forecast: Why The Strong Start To April May Continue For EUR/GBP, EUR/JPY, EUR/USD

EURO STARTS APRIL ON STRONG FOOTING

The first few months of 2021 proved disappointing for the Euro, but the arrival of April and 2Q’21 brings about the beginning of a seasonally strong period for the single currency. In fact, with the worst month of the year for the US Dollar and the best month of the year for the Euro now underway, there is a quantitative tailwind that may help the Euro claw back some of its early-year losses.

GERMAN BUND, JGB, UK GILT, & US TREASURY 10-YEAR YIELDS: WEEKLY CHART (APRIL 2014 TO APRIL 2021) (CHART 1)

Euro Forecast: Why the Strong Start to April May Continue for EUR/GBP, EUR/JPY, EUR/USD

Helping bolster the Euro’s case for a rebound through the first full week of April has been a small but meaningful shift in interest rate differentials that support recent strength in EUR/JPY, EUR/GBP, and EUR/USD: while Japanese government bond yields, UK Gilt yields, and US Treasury yields have pulled back from their yearly highs, German Bund yields have pulled back less.

EUR/USD RATE TECHNICAL ANALYSIS: DAILY CHART (MARCH 2020 TO APRIL 2021) (CHART 2)

Euro Forecast: Why the Strong Start to April May Continue for EUR/GBP, EUR/JPY, EUR/USD

EUR/USD rates have broken their downtrend from the February and March swing highs, but the pair is once again on approach to a cluster of Fibonacci levels that have proved to be a cluster of both support and resistance going back to last July: the 76.4% Fibonacci retracement of the 2019 low/2020 high range at 1.1945; the August and September 2020 highs at 1.1967 and 1.2011, respectively; and the 23.6% Fibonacci retracement of the 2017 low/2018 high range at 1.2033.

EUR/USD rates are above their daily 5-, 8-, 13-, and 21-EMA envelope, but the quad of moving averages is not in bullish sequential order. Daily MACD is trending higher, but remains below its signal line, while daily Slow Stochastics have started to climb through their median line. Momentum is starting to gather pace in a bullish manner, which means we can’t dismiss the fact that recent tailwinds may lead to a test of the 1.1945/1.2033 area. Unless the pair climbs through this zone, it remains doubtful that EUR/USD has significant gains ahead of it.

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