Recently, financial markets have reacted more to words than to real facts. It was worthwhile for the US Treasury Secretary Steven Mnuchin to talk about the positive impact of a weak currency on trade, as the pair EUR / USD rewrote a three-year high. It was worthwhile for Donald Trump to show respect for the policy of a strong dollar, as the euro lost some of the conquered positions. And what's the difference that under the influence of the fiscal stimulus, the US GDP can accelerate to 3%, that the yield of treasury bonds is storming perennial peaks, the Fed continues the cycle of tightening monetary and credit policy, and macrostatistics in the States is not tired of pleasing the eye?

Unlike the representatives of the American administration, Mario Draghi could not find the right words to stop the "bulls" in the pair EUR / USD. Yes, he used the autumn bazooka as a reference that the uncertainty caused by the increased volatility of the euro is subject to control by the ECB. Yes, he expressed surprise at the fact that some investors are waiting for rates to increase this year. Yes, he criticized the words of Steven Mnuchin. But in fact, he did not say anything that could surprise the markets. Maybe he did not want to? Unlike the growth of the single European currency against the US dollar, its trade-weighted rate remains stable. This is helped by the strengthening of the British pound.

According to Danske Bank, the pair EUR / USD can be seen at around 1.29 during 2018, as there is no reason to assume that the demand for European assets will fall. The Bank believes that the strong positions of the euro are due to the balance of payments. A stable high surplus of trade is exacerbated by the inflow of real and portfolio investments. I, in turn, want to add that the decrease in the inverse correlation between the main currency pair and the Old World stock indices shows the disinterest of foreign investors to hedge the risks. They seriously expect to earn both on the growth of the stock market, and on strengthening the euro.

Dynamics of EuroStoxx and EUR / USD

Source: Bloomberg.

In general, the stability of the uptrend in the pair EUR / USD does not cause me any doubts. Confuses only one thing. Events are developing too quickly. The scenario, which was to be realized during the year, was released in January. Rumors of an early normalization of the ECB's monetary policy instead of the second-third quarter arose after the publication of the December meeting of the Governing Council and became a catalyst for the euro's growth to three-year highs.

The rate that the tax reform will disperse GDP and inflation, which, in turn, will force the Fed to aggressively raise the rate on federal funds and lead to a strengthening of the dollar, does not work. More precisely, it works only until the last point. The market stopped paying attention to the Fed, and the yield differential of US and German bonds reached its highest level in the last 18 years. In this situation, the pair EUR / USD was to trade near 0.92.

Technically, the update of the January maximum will allow to count on the implementation of the target by 200% on AB = CD. On the contrary, falling below the support of 1.236 will increase the risks of correction development.

EUR / USD, daily chart