Euro / US Dollar (EU

Real-time - 05/25 12:30:06 am

Monetary Expansion

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04/15/2013 | 11:30 am
Opinion : Bullish above 1.2708 
Target price : 1.3445 
Decisions of the Japanese central bank (BoJ), combined with the continuation of an ultra-accommodative monetary policy overseas, are supporting risk appetite and allow the single currency to resume its rise.

Monetary creation allows markets to forget, at least temporarily, structural problems of an economic area. Thus, thanks to the support of major central banks, investors’ attention turns away from the Italian political impasse or from the restructuring of the Cypriot banking system where most of the deposit over €100,000, including businesses, will be involved.

Hiring in the United States has been divided by three in a month but markets are not really worried as long as these statistics encourage the Federal Reserve to pursue its quantitative easing program. While the ECB, which is satisfied with the current price levels, seems to be less likely to reduce its accommodative monetary policy, the BoJ announced its intention to double its monetary base over the next two years in order to eradicate deflation.

Which has the effect of stimulating the single currency as capital is fleeing from the Japanese archipelago and the attractiveness of Europe and the risk, in general, is significantly increasing, as shown by the U.S. stock market which constantly beats new records.

Technically, the Euro bounced on the 50-week moving average and the long-term bullish trend is now resuming. Thus, we are long with a first objective at USD 1.3445. However, a crossing of the USD 1.2708, confirmed in weekly closing price, would invalidate this scenario.

Mathieu Burbau
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