EUR/USD Forecast: Signs of strength? Defying data and the German court provide hope for bulls
|- EUR/USD has weathered a horrible US jobs report.
- Tensions within the EU and gradual lifting of lockdowns are on the agenda.
- Monday's technical chart is marginally bearish.
See you in court – that is the message that the European Commission has sent to the German Constitutional Court, following last week's ruling. Ursula von der Leyen, the European Commission's president and a German, has said that judges in Karlsruhe have overreached their authority by deeming part of the European Central Bank's bond-buying plan – which is critical to stabilizing the economy – as illegal.
The ECB's Pandemic Emergency Purchase Program (PEPP) – the latest scheme – is set to run out of funds in October and more may be needed. Any impediment could weigh on the euro, and the intervention from Brussels is meant to allow the bank to do its job.
The news from the EU is supporting the euro, and so are the small victories against coronavirus. Europe's largest countries have reported a drop in daily deaths from the disease, as they all proceed with a gradual easing of the lockdowns. Fears of a second wave – especially in Germany – are feared.
On the other hand, the European economies continue suffering, with Italy reporting a plunge of 28.4% in industrial output in March. It joins other depressing figures released in recent weeks.
Nevertheless, statistics seem not to matter, at least for now. The US Non-Farm Payrolls report showed a loss of 20.5 million jobs in April and the Unemployment Rate leaped to 14.7% – the worst since the 1930s. Nevertheless, the shock was priced in and investors also ignored the Bureau of Labor Statistics' comment that the level of joblessness was probably five percentage points higher.
Will this change? Probably at some point, but timing is hard to grasp. In the meantime, the euro's ability to withstand pressure is a bullish sign.
US consumer figures and coronavirus data could move currency pair later this week.
EUR/USD Technical Analysis
Euro/dollar is trading below the 50, 100, and 200 Simple Moving Averages on the four-hour chart, a bearish sign. However, all these lines are within 30 pips, and the pair could easily pass them. Momentum and the Relative Strength Index have stabilized.
All in all, bears have a minor advantage, but one that could be wiped out easily.
Support awaits at 1.0810, which was a low point on Friday. It is followed by 1.0770, Thursday's swing low, and also a support line in April. Last month's trough of 1.0730 is next.
Resistance is at 1.0855, where the 100 SMA hits the price, and then by 1.0875, a swing high which also converges with the 200 SMA. The stubborn resistance line of 1.0890 is critical resistance. The next lines are 1.0925 and 1.0975.
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