EUR/USD Forecast: Further gains? German optimism, ECB speculation, uptrend support point higher

Euro boom – a combination of words that seems like an oxymoron for many seems to materialize. The old continent has overcome its teething problems related to the vaccination campaign and is now benefitting from a steady recovery that supports the common currency.

Germany's ZEW institution is set to release its Business Climate survey figures for June, and additional increases are on the cards. The EU eased travel restrictions on Monday en route to using the "green passport" next month. COVID-19 cases continue falling sharply across the old continent.

Moreover, it seems the European reopening is steady and does not struggle with the issues seen in the US and its rapid return to normal. While headline inflation has risen to 2%, core prices are at 0.9% as of May, allowing the European Central Bank to continue supporting the recovery.

Tensions are mounting toward the ECB's decision on Thursday, where the Frankfurt-based institution is set to acknowledge the recovery but without pressing on the brakes. Refraining from tapering should keep the mood upbeat.

See ECB Preview: Why June's decision presents a buy the dip opportunity

Across the pond, the dust has settled from Friday's disappointing Nonfarm Payrolls report – an increase of only 559,000 jobs against 664,000 expected – and from the upbeat comments by Treasury Secretary Janet Yellen.

The current finance minister and former Chair of the Federal Reserve said that an increase in interest rates would be a "plus" for the US economy and the Fed. The central bank and markets are awaiting Thursday's release of fresh Consumer Price Index figures. Any figure above 5% could spook markets and boost the dollar, but the dollar will likely remain pressured on Tuesday.

All in all, the currency pair has room to extend ts gradual drift higher.

EUR/USD Technical Analysis

Euro/dollar has been setting higher highs and higher lows since nearly hitting 1.21 on Friday. On its way up, it has overcome the 200 Simple Moving Average on the four-hour chart. However, it has yet to recapture the 50 and 100 SMAs and momentum remains to the downside. All in all, bulls are gaining ground, but bears are fighting back.

Resistance awaits at the round level of 1.22, which held the pair back on Monday. It is then followed by 1.2255 and 1.2266 – the latter being the high point in May.

Some support awaits at 1.2160, which provided support last week, followed by 1.2145, a stepping tone on the way up, the last defense before 1.21.