EUR/USD Forecast: Bulls hold the grip, for now

Valeria Bednarik FXStreet

EUR/USD Current Price: 1.0649

ECB President Christine Lagarde mentioned a rate hike as early as July.
Stocks advance amid comments from US President Biden on Chinese tariffs.
EUR/USD has turned near-term bullish, could extend its advance up to 1.0770.

The EUR/USD pair is up on Monday, as the greenback remains weak, while the shared currency got an unexpected boost from the European Central Bank President Christine Lagarde. Among other things, she said that she expects the facilities program to end “very early” in the third quarter of the year, leaving policymakers in a position to exit negative interest rates by the end of the quarter. Also, this would allow a rate hike to take place in July, in line with forward guidance, according to Lagarde. EUR/USD peaked at 1.0687, its highest in almost a month.

Meanwhile, stocks trade higher, helped by comments from US President Joe Biden, who said he would reconsider tariffs on Chinese imports. Gains, however, are modest, with Wall Street set to open marginally up. Government bond yields, on the other hand, remain steady around Friday’s closing levels.

The EUR got additional support from an unexpectedly encouraging German May IFO survey, showing that the Business Climate improved to 93 from 91.9, while Expectations rose to 86.9, beating expectations. The US published the April Chicago Fed National Activity Index, which improved to 0.47 from a downwardly revised 0.36 in March. The macroeconomic calendar has nothing else to offer today on these two economies.

EUR/USD short-term technical outlook

The EUR/USD pair briefly surpassed the 38.2% retracement of its 1.1184/1.0348 decline at 1.0670, holding nearby ahead of the US opening. Technical readings in the daily chart support a bullish continuation. Indicators head firmly north within positive levels, reflecting persistent buying interest, while the pair advances beyond a now flat 20 SMA. The latter stands near the next Fibonacci support level at 1.0545.

The 4-hour chart shows that the pair has reached overbought conditions. Technical indicators have lost their directional strength but consolidate around their daily highs. The 20 SMA keeps advancing after crossing above the 100 SMA, both below the current level. Nevertheless, EUR/USD is battling with a bearish 200 SMA, a few pips below the aforementioned Fibonacci resistance level. Overall, the risk is skewed to the upside, with scope for the pair to extend its gains to 1.0770, the 50% retracement of the latest daily slide.

Support levels: 1.0605 1.0545 1.0490

Resistance levels: 1.0670 1.0720 1.0770

View Live Chart for the EUR/USD

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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