EUR/USD Forecast: Demand for high-yielding assets likely to continue

Valeria Bednarik FXStreet

EUR/USD Current Price: 1.2167

Poor US employment-related data backed the Fed’s ultra-loose monetary policy.
Wall Street reached all-time highs, while US government bond yields plunged.
EUR/USD is overbought but still has room to extend its advance.

The EUR/USD pair reached1.2171 last Friday, its highest since March 1, closing the week a few pips below such a high. The greenback collapsed after the release of the April Nonfarm Payrolls report, which showed that the US added just 266K jobs in the month, largely missing the roughly 1 million expected. The unemployment rate increased to 6.1% against the expected slide to 5.8%, while the participation rate increased to 61.7% from 61.5%. Wages rose more than anticipated but at a slower-than-average pace.

The report spurred demand for high-yielding assets, with the DJIA and the S&P 500 reaching all-time highs and US government bond yields plummeting. The poor employment figures somehow confirmed the US Federal Reserve’s stance of maintaining an ultra-loose monetary policy for longer, and that’s what speculative interest rushed to price in.

On Monday, the EU will publish May Sentix Investor Confidence, foreseen at 14 from 13.1 previously. The US will release the April ISM-NY Business Conditions Index, expected at 29.5 from 37.2 in the previous month.

EUR/USD short-term technical outlook

The EUR/USD pair is poised to extend its advance, as it settled near a fresh multi-week high. The daily chart shows that it has accelerated north above all of its moving averages, with the 20 SMA heading firmly higher between the longer ones. Technical indicators have bounced from their midlines, now offering strong bullish slopes. In the near-term, and according to the 4-hour chart, the pair is overbought, although technical indicators have barely losing their bullish strength in extreme levels. The moving averages remain far below the current level, reflecting the sharp increase in buying interest.

Support levels: 1.2150 1.2110 1.2070

Resistance levels: 1.2190 1.2240 1.2285

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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