Risk Appetite The information presented in this publication is provided purely for informational purposes and does not constitute investment advice, an offer to sell, or a solicitation to buy, and should not be used as a basis or considered an incentive to engage in any investment. The macro point Risk Appetite Macro Point The return of risk appetite in the foreign exchange market has led to a widespread decline in the US dollar in recent sessions. Significant economic improvement on both sides of the Atlantic and accelerated vaccination in Europe have been the two main drivers of the greenback's decline. In the United States, economic growth in the first quarter surged to 6.4% (unseen for decades) thanks to numerous support measures for households implemented by the Trump and Biden administrations. The strong rebound in activity, expected to continue in the coming quarters, should lead the US Federal Reserve (Fed) to revise upward its economic projections for 2021 and 2022 at its June meeting. However, as J. Powell reiterated last week, no change in monetary policy is expected (see our analysis last week on 'tapering'). In other words, the Fed will do its utmost to support the ongoing recovery for as long as necessary. In Europe, the pandemic is receding. According to the latest data, herd immunity (70% of the adult population vaccinated) should be reached in the EU by July. Several countries have already announced a gradual reopening of economies starting this month. In the United Kingdom, where vaccination is ahead of the EU, life has returned to normal. According to the latest official figures, about 38 million Britons now live in an area where no new Covid cases have been reported in recent weeks. The only point of concern regarding the pandemic globally is India. A humanitarian disaster is hitting the world's sixth-largest economy. Nearly two-thirds of its economy is now nearly halted. However, the negative impact on global growth this year is expected to be mild. Finally, unsurprisingly, Sweden's central bank kept its key interest rate unchanged at 0% at its meeting last week. The Bank of Japan acted similarly. It did, however, update its economic forecasts for the coming years. Despite all the efforts made by Governor Kuroda, inflation is still not expected to reach its 2% target. For 2023, the Bank of Japan forecasts inflation at 1.0%. It is therefore likely that in the medium term the central bank will adjust its support measures. Technical point On the foreign exchange market, the risk appetite has obviously favored the euro. The EUR/USD pair finally managed to break through the symbolic threshold of 1.21 in the middle of last week. The next strategic threshold is now at 1.2204 (acting as resistance). A short-term consolidation of the pair cannot be excluded if market operators decide to take their gains (in the space of a month, the pair has gained nearly 3%).The euro also increased its gains against the Japanese yen. On a monthly basis, the EUR/JPY pair gained more than 2.1%, and since the beginning of the year, the performance reached 4.5%. Since the departure of D. Trump (a risk factor for the market), the yen has seen a sharp decline. Furthermore, significant concerns regarding the pandemic in the archipelago also hurt the yen's exchange rate. Our medium-term target for EUR/JPY is 134.48 (a level not reached since early 2018 and now acting as resistance).The supports and resistances displayed below indicate the low and high points within which the rates should evolve during the week.SUPPORTSWEEKLYRESISTANCESWEEKLYS2S1R1R2EUR/USD1.17311.18891.22041.2362EUR/GBP0.84090.85420.87610.8808EUR/CHF1.08331.09101.11001.1156EUR/CAD1.45951.48201.52061.5321EUR/JPY128.97129.73133.00134.48For personalized advice on trends and exchange rate hedges, contact our trading room: Announcements to follow This week will be busy in terms of macroeconomic indicators with a multitude of PMIs on both sides of the Atlantic. However, the market's attention will focus more on the US employment figures, which should further confirm that the activity dynamic remains particularly strong. This should logically strengthen the risk appetite in the foreign exchange market. Note that the Bank of England meeting should attract little interest. The central bank is on autopilot, as are the Fed, the Bank of Japan, and the European Central Bank.Finally, expect a probable surge in volatility on GBP pairs on May 6, during the Scottish parliamentary elections. If the Scottish National Party (currently governing Scotland) wins, it is very likely that a new referendum on Scotland's independence will occur. Should this scenario happen, it would be a negative signal for the British pound. But for now, this risk is not 'priced in' (factored into the rates) by the market.Below you will find the publications and events that should have a major impact on currency exchange rates.DAYTIMECOUNTRYINDICATOREXPECTATION05/0316:00ISM Manufacturing PMI (April)Consensus at 64.9 against 64.7 previously.05/0410:30Manufacturing PMI (April)Decline to 57.9 versus 60.7 previously.05/0514:15ADP Survey (April)Consensus at 750k against 517k in March.16:00ISM Non-Manufacturing PMI (April)Market expects a figure at 64.0 against 63.7 previously.05/0613:00Central bank meetingStatus quo.05/0714:30NFP Employment Report (April)Increase in job creation (925k) and expected decrease in unemployment rate (5.8%).Did you enjoy this content? Share it!