Euro / US Dollar (EU
EURUSD
Delayed - 08/16 09:17:18 pm
1.1765USD
+0.21%

ECB giving a boost

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05/03/2013 | 12:01 pm
Opinion : Bullish above 1.2902 
Target price : 1.3177 
After a political deadlock broken in Italy and the status quo of the Federal Reserve, the new rate cut by the ECB has led the euro in contact with USD 1.30.

After two months of fruitless negotiations, Enrico Letta has finally emerged as the new leader of the transalpine Peninsula forming a new government who should support economic recovery. Long rates fall to levels not seen for two years while the Italian Parliament has given a vote of confidence in the new executive.

On the monetary front, the disappointment caused by the recent U.S. figures has forced the Fed to maintain its asset purchases at $ 85 billion per month, making a sustainable rebound of the US dollar impossible.

During his press conference, Mario Draghi said the bank was ready to act again if necessary and would continue to provide unlimited liquidity to banks until July 2014 at least. Especially, the Italian economist has pointed out, for the first time, that he kept “an open mind” on the possibility of adopting negative rates for the deposit facility.
The increased vigilance of the monetary authority should ultimately encourage risk appetite and allow the euro to appreciate again.

Technically, after two successive impetus at USD 1.32 and beyond, the Euro is back near his favorite USD 1.30 threshold. Since we remain bullish on the parity, we take a long position with a first objective at 1.3177. An entry point at 1.2990 is even a good opportunity. However, note that the release of NFP report on May 3 could create significant volatility.
Mathieu Burbau
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