The most popular currency pair in the world moved towards the resistance level of 1.2266 before settling around the level of 1.2249 at the time of writing. EUR/USD is awaiting more stimulus or move down amid profit-taking selling. The euro in general is still benefiting from the optimism that dominates the markets from the reopening of European economies amid a rapid surge in vaccination against the epidemic. This paves the way for an economic recovery in the remainder of 2021.
Commenting on the performance of the EUR / USD pair, strategic analysts at TD Securities say. The euro is unlikely to make a coordinated breakout above current levels against the greenback. In a customer briefing, Mark McCormick, an analyst at TD Securities, said it was "once again the time to sell" the euro. This recommendation comes at a time when the exchange rate of the euro against the dollar (EUR / USD) restores stability above the 1.22 area, which was noted in the past as a level it has always tried to breach.
The return of the EUR / USD to the critical 1.22 pivot point, raises questions about what is next. The fundamental questions are whether it will return to the 1.20 range, or rise to a peak of 1.25 and above. The Euro is one of the best performing G10 currencies over the past week, as it advanced against all the major currencies except for the Swiss franc. As of writing, the EUR / USD has in fact reached its highest level on January 8 and the bulls - the bulls - will be looking to the current buying impulse to bring a new high in 2021, which is currently at 1.2349.
In general, TD Securities has a view that predicts that the EUR / USD will stabilize in the range of 1.22 to 1.18 in 2021, and the level of 1.20 will not be decisively breached and stabilized until 2022. Accordingly, TD Securities is monitoring how the eurozone countries exit from the recent closings, noting that the spreads between the US and Europe were often a good indicator of how the euro is performing against the dollar.
Business sentiment in Germany strengthened to its highest level in two years in May as the lifting of restrictions related to Covid-19 boosted expectations among managers, according to survey data from the IFO institute. On the same day, data released showed that the largest economy in the Eurozone contracted slightly more than initially expected in the first quarter. The IFO business confidence index rose to a reading of 99.2 in May from a reading of 96.6 the previous month. This was the highest reading of the index since May 2019. The reading was also higher than economists' expectations of 98.2.
Statistics agency Destatis reported that German gross domestic product (GDP) fell by -1.8 percent compared to the previous quarter in the first quarter, in contrast to a 0.5 percent growth in the fourth quarter. The sequential decline was revised from an estimated -1.7 percent on April 30th. On an unadjusted basis, the annual decline in GDP growth deepened to 3.4 percent from 2.3 percent in the fourth quarter. The rate was revised from -3.3 percent. Commenting on the results, Carsten Brzeski, an economist at ING Bank, said that the strong reading of the Ifo Index for May shows that optimism about a strong economic recovery is mounting. Accordingly, Brzeski expects private consumption and the construction sector to be the main drivers of growth in the second quarter.
According to the technical analysis of the husband: the recent stability of the EUR / USD pair raises the suspicion of forex traders that the pair will not move more than that before being subjected to selling to reap profits, especially since the recent gains pushed the indicators to strong levels of saturation with buying. The pair may remain in a narrow range until the US inflation numbers are announced, and it does not expect strong movements for the pair today due to the absence of the economic calendar of important and influential releases. In general, the stability of the euro dollar above the resistance 1.2200 will remain supportive of the upside, and I see the resistance levels 1.2265, 1.2330 and 1.2400, the most important thing to consider selling.
There will be no reversal of the general trend without a breach of the 1.2000 level.
