Technical Analytics Report

EUR/USD: Fundamental Analysis Report

EUR/USD: Fundamental Analysis Report 20 May 2021


Current trend: correction after the publication of the FOMC minutes

EUR declines amid the publication of the last Meeting Minutes of the US Federal Reserve Committee (FOMC), where it was noted that the national economy was recovering at a steady pace after the pandemic and regulatory intervention in monetary policy are not required at the moment. 

In turn, the speech of St. Louis Fed President James Bullard on May 19 supported the dollar. According to the official’s position, the inflation rate in the country in 2021–2022 will rise above 2% but the observed dynamics in the US labor market do not cause concern for the economy. Nonfarm Payrolls for April temporarily decreased to 266K new jobs instead of the planned 978K but, according to the US Federal Reserve, the May indicator can be expected at 500K. The regulator is ready to change the course of monetary policy if necessary, but many of the agency’s members oppose the adjustment amid the ongoing COVID-19 pandemic. 

Meanwhile, the yield on 10-year US Treasuries is growing by 2.7% per day to 1.681%, helping the US currency to dominate the competition. Yesterday, USD Index added 0.43% and closed at 90.160, and if the strengthening continues at the end of the week, the euro may decline to the area of 1.2070. 

Today, traders will pay attention to the speech of the Chairman of the European Central Bank Christine Lagarde at 14:00 (GMT+2), and then at 14:30 (GMT+2), US Initial Jobless Claims data will be published. A reading above 450K will negatively affect USD and, conversely, a significant reduction in claims may support it, which will serve as a driver for an even deeper correction for EUR. 

Support and Resistance

Now, the pair is trying to consolidate above 1.2175. Its breakout allows growth to the area of 1.2325. Otherwise, a correction with the target at 1.2000 will begin. The medium-term trend is upward. Within it, buyers attempted to break through the target zone 3 (1.2200–1.2184) but failed to consolidate above the resistance level, therefore, a correction with the target at the trend border of 1.2062 may develop.

·         Resistance levels: 1.2175, 1.2323, 1.2440.

·         Support levels: 1.2002, 1.1845, 1.1717.

Trading Tips

Short positions may be opened below 1.2125 with the target at 1.2002 and stop loss 1.2187. Implementation period: 7–9 days.

Long positions may be opened from 1.2002 with the target at 1.2222 and stop loss 1.1931. 

Scenario

Timeframe: Weekly

Recommendation: Sell Stop

Entry Point: 1.2120

Take Profit: 1.2002

Stop Loss: 1.2187

Key Levels: 1.1717, 1.1845, 1.2002, 1.2175, 1.2323, 1.2440

Alternative Scenario

Timeframe: Weekly

 Recommendation: Buy Limit

Entry Point: 1.2002

 Take Profit: 1.2222

 Stop Loss: 1.1931

 Key Levels: 1.1717, 1.1845, 1.2002, 1.2175, 1.2323, 1.2440


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