In the European market on Tuesday (November 20), euro To USD After the rapid decline, the low position fluctuated, and the current trading is at the front line of 1.1433. EURUSD was under heavy selling pressure, rapidly falling 50 points from the high point of 1.1472 to the low point of 1.1422 in the period, ending the previous five days of rising trend. The spread of Italian government bond interest rates caused the market to worry about Italian economic growth again.
The main reason for the weakness of the euro is that the yield difference between Italian and German 10-year government bonds has expanded to 335 basis points. Once it expands to above 400 points, it will shake the Italian banking sector, which may trigger the sector into another dilemma.
At the same time, the rise in risk aversion expanded the demand for safe haven US dollars, driving the US dollar to rebound from multi week lows, and also hitting the euro against the US dollar. In addition, recent news said that the Eurozone money market is no longer fully pricing the ECB's 10 basis points interest rate hike in 2019.
The European Central Bank is expected to continue to tighten monetary easing marginally. However, considering the weak economic growth, the European Central Bank's cautious attitude is expected to be further strengthened. The first interest rate increase will be postponed to the fourth quarter of 2019, so as to continue the low interest rate state and support economic growth. Previously, the market was generally expected to raise interest rates in the third quarter of next year.
Credit Agricole advised investors to sell EURUSD at high levels near the current level. This week, the focus was on Italian Finance Minister Jean Claude Tria answering questions from lawmakers in the House of Commons, and the release of the Eurozone Multinational Purchasing Manager Index (PMI). Any indication that the recovery of manufacturing business activities will be regarded as an improvement of trade-related capital flows, which may trigger an upward exchange rate, In particular, the risks associated with closing positions due to expanding speculative positions are still upward.
When it comes to Italy's budget, a large number of negative shocks have been absorbed by the euro, and the probability of unexpected optimism is low. Based on the above factors, we can sell the euro against the dollar at the high level of the year.
The Bank of Tokyo Mitsubishi UFJ believes that the recent dove language issued by the Federal Reserve officials provides some support for the euro against the dollar, but the short-term upward space is still limited.
The Federal Reserve is expected to raise interest rates again in December, but these more dovish comments have raised the probability that the Federal Reserve will consider suspending the pace of interest rate increase in 2019, rather than raising interest rates once a quarter so far this year, which is more in line with the bank's expectation of the Federal Reserve to raise interest rates, and it is expected that the strong dollar will gradually weaken next year.
However, the euro itself still faces selling pressure, which will limit its upward space. Last Friday (November 16), the speech of the Federal Reserve officials pushed up the euro, focusing on Italy's budget issues and the progress of the Brexit negotiations. Against this background, it will be difficult for the euro to rise significantly against the dollar
The technical side shows that the EUR/USD pulled back after breaking through the previous decline channel, with the initial support level at 1.1375 and 1.1358, and then at the integer level of 1.1200. On the upward side, it needs to break above the 1.1450 area first, and then it needs to break through the top near 1.1500 last week to rise to the 1.1600 pass.
According to Huitong Finance's eHuitong software, at 19:38 Beijing time, the euro was at 1.1433/35 against the dollar.
