EUR/USD: A short-lived correction cannot be ruled out

A positive mood has been weighing on the safe-haven dollar and sending EUR/USD to 1.2150, the highest since late February. Two steps up, now one step down? US GDP figures are critical to the next moves, Yohay Elam, an Analyst at FXStreet, reports.

The broader trend is to the upside

“The Federal Reserve left its interest rate unchanged as expected in its April decision, and stressed that any pickup in inflation is transitory even though acknowledging the economic improvement. Reducing the pace of buying bonds from the current $120 billion/month was not even on the agenda – and that means further dollar devaluation.” 

“The economic calendar is pointing to a considerable annualized increase of 6.5% in US GDP in the first quarter of 2021. While there is a chance for GDP to fall short of investors' expectations, the euro is well-positioned to take advantage of a minor miss in US data and may weather upbeat figures. The old continent's vaccination campaign has picked up markedly and infections are falling.”

“EUR/USD is trending higher since bottoming out early in April. It has recently been trading above an uptrend support line that follows the 50 Simple Moving Average. Momentum remains to the upside and the Relative Strength Index (RSI) is below 70 – thus outside overbought conditions.  Overall, bulls are in the driver's seat.” 

“The fresh April high of 1.2150 is the immediate resistance line. It is followed by 1.2180 and 1.2240, levels last seen in February.” 

“Support awaits at 1.2117, the previous April peak, and then by 1.2080, 1.2050 and 1.20, all stepping stones on the way up.”