- EUR/USD has been edging higher as the US dollar drops with yields.
- Worries about China's cooldown and Europe's covid concerns may limit the next moves.
- Tuesday's four-hour chart is painting a mixed picture.
Easter is over – but Europe's largest countries remain under significant measures to curb the spread of COVID-19, weighing on their economies. The vaccination campaign is set to pick up in the second quarter, which begins in earnest only on Tuesday, and that provides hope. However, promises to ramp up inoculations have been broken in the past.
On the other hand, the US economy is thriving, as seen by the ISM Services Purchasing Managers' Index for March, which hit a record high of 63.7 points sowing enthusiasm in America's largest sector. That publication joined an increase of nearly one million jobs last month. Signs of a quick recovery – al; alongside an accelerating vaccination effort – raised expectations for inflation and a rate hike by the Federal Reserve.
On the other hand, the greenback is also a safe-haven currency that falls when the global mood improves. If the US is growing quickly, it is set to carry the rest of the world forward and investors may seek riskier assets. However, this risk-on/risk-off dynamic is supporting the dollar on Monday, amid reports that China wants to curb credit.
Moving forward, apart from waiting for a pickup in Europe, another known unknown is the fate of President Joe Biden's infrastructure plan. While conservative Democratic Senator Joe Manchin opposes a corporate tax hike to 28%, he supports a raise from 21% to 25% and seems to agree to other parts of the program. Moreover, Dems will be able to use the short-cut reconciliation process to pass the bill, once they agree within themselves on the details.
If infrastructure investment advances, it could remind markets of the potential for higher inflation, sending the dollar up once again.
All in all, EUR/USD's recent recovery seems short-lived, at least until Europe gets its vaccination effort going substantially faster.
EUR/USD Technical Analysis
Momentum on the four-hour chart is to the upside, and euro/dollar also trades above the 50 Simple Moving Average. However, it remains capped below the 100 and 200 SMAs. All in all, the picture is mixed.
Some resistance awaits at the daily high of 1.1820, followed by 1.1875, which provided support in March. It is followed by 1.1910 and 1.1950.
Support is at 1.1785, a resistance line from last week, followed by 1.1760, 1.1740 and finally by the round 1.17 level.
More stimulus is coming – But what does that mean for commodity prices?
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD clings to gains above 1.0750 after US data
EUR/USD manages to hold in positive territory above 1.0750 despite retreating from the fresh multi-week high it set above 1.0800 earlier in the day. The US Dollar struggles to find demand following the weaker-than-expected NFP data.
GBP/USD declines below 1.2550 following NFP-inspired upsurge
GBP/USD struggles to preserve its bullish momentum and trades below 1.2550 in the American session. Earlier in the day, the disappointing April jobs report from the US triggered a USD selloff and allowed the pair to reach multi-week highs above 1.2600.
Gold struggles to hold above $2,300 despite falling US yields
Gold stays on the back foot below $2,300 in the American session on Friday. The benchmark 10-year US Treasury bond yield stays in negative territory below 4.6% after weak US data but the improving risk mood doesn't allow XAU/USD to gain traction.
Bitcoin Weekly Forecast: Should you buy BTC here? Premium
Bitcoin (BTC) price shows signs of a potential reversal but lacks confirmation, which has divided the investor community into two – those who are buying the dips and those who are expecting a further correction.
Week ahead – BoE and RBA decisions headline a calm week
Bank of England meets on Thursday, unlikely to signal rate cuts. Reserve Bank of Australia could maintain a higher-for-longer stance. Elsewhere, Bank of Japan releases summary of opinions.