Today we shall take a look at the EUR/USD currency pair. The exchange rate remains in the broad bullish wave that began at the very end of March this year. Last week it managed to surpass the 1.22 level and is now trading at its highest since January.
The situation of the European single currency remains positive for now. As reflected in our previous analyses of this pair, the euro has stabilized due to more rapid vaccinations in the EU and decreasing Covid-19 infection rates. More and more countries are undoing their social and economic restrictions, which is bringing life back into the European economy. GDP growth has remained consistent with the forecasts and the latest PMIs were excellent, even if inflation is a bit slower to recover than desired. Still, thanks to high risk appetite among investors, the euro remains popular and is doing well against the dollar for the time being.
As for the USD, its strength or weakness are dependent on the mood of investors and whether they believe more in what the Federal Reserve says now or predictions about what it might do in the future. Because, as previously reported, the Fed has stated multiple times that a dovish monetary policy is necessary to help the US economy overcome the Covid-19 crisis, which is still manifesting its negative impact on the labor market. However, the latest minutes from the FOMC meeting revealed that members of the central bank are already considering the need for an early tapering of the Fed’s asset purchases due to rising inflation and PMIs. In addition, the relationship between the US dollar and US Treasury yields has been positive of late, so if bond yields start rising again, expect the USD to strengthen as well.
In terms of the daily chart, today we have a pivot point for the pair located at 1.2206, with the price currently trading slightly above it. The daily support levels lie at 1.2182 and 1.2148. The daily resistances are located at 1.2240 (overcome) and 1.2264. The indicators of technical analysis strongly agree in recommending a buy position today.
