Market Analysis – EURUSD
The Euro during this morning’s Asian Session continues to increase in value, forming its fifth consecutive bullish candlestick on the daily chart. The Euro has reached a new price high since the 25th February, and has now formed a full price correction after the downward trend seen in March. The currency is clearly showing its bullish strength as economies around the European States formerly come out of lockdown and tourism is due to start again. However, traders are taking into consideration previous resistance levels such as the level of 1.2243, which was formed on the 25th February. If resistance is found, support will be placed at 1.2117 according to the Fibonacci Indicator, or possibly even lower at 1.2050 if using price action to indicate support and resistance.
Looking at the US Dollar individually, we can see the US Dollar Index continues to decline, but has not yet passed to a new price low. Looking at the performance with the Dollar against its main competitors we can see the currency is weakening against the Euro, increasing against the Yen, and not yet showing any major movements with the Pound and Swiss Franc. The Euro currency index is currently increasing with a fully formed bullish candlestick this morning. The Euro is strengthening today against its main competitors including the Pound, the Yen, the Franc and the Canadian Dollar.
Investors are disappointed with the persistence of the US Fed officials, who do not want to change the current soft monetary policy, despite the noticeable rise in inflation. Yesterday, the President of the Atlanta FRB, Raphael Bostic, noted that he is satisfied with the current policy of the regulator, despite the rise in prices. He pointed out that it should help to achieve high levels of employment, the absence of which he considers a more serious problem than inflation. Nevertheless, many investors believe that the agency’s inaction is wrong, believing that rising consumer prices could lead to overheating of the economy.
The weak April data on the construction market put additional pressure on the US Dollar. The number of building permits issued rose from 1.755 to 1.760 million, but was below the forecast of 1.770 million. The indicator of new home construction fell altogether from 1.733 to 1.569 million. Traders today will be looking at the Federal Reserve again as more members are scheduled to comment on the monetary policy and general economic activity.
The Euro is growing despite weak preliminary data on GDP for Q1 2021. According to Eurostat, the economy of the Eurozone contracted by 0.6% QoQ and by 1.8% YoY. The decline occurred in all leading European economies (Germany, Italy, Spain, and the Netherlands) with the exception of France, whose GDP grew by 0.4%. Employment in the Eurozone also fell by 0.3% QoQ and 2.1% YoY. However, investors remain optimistic as they hope for the pandemic to fade soon and the coronavirus restrictions begin to ease. We should also note the comments of the European Central Bank’s representative, Francois Villeroy de Galhau, who said today that there is no risk of prolonged inflation growth in the Eurozone, and the regulator’s monetary policy should remain flexible.
With regards to the Euro, investors are likely to be paying close attention to Friday’s economical announcements where all european states will announce their PMI figures for services and manufacturing. The market is likely to deem German and French PMIs to be of most importance, though the market will be interested to see results from Italy, Netherlands and Spain.