EUR/USD: The ingredients are in place for a fresh rise to the May high at 1.2266

A necessary correction before the next move higher? That seems the most likely path for EUR/USD, according to Yohay Elam, an Analyst at FXStreet. The pair has been paring its gains related to Fed dovishness but an attack on 1.2266 may be coming.

A fading out of inflation concerns and optimism about Europe could push the euro back up

“Atlanta Fed President Raphael Bostic and his colleague from Chicago Charles Evans are set to speak today and given their previous statement, they will likely remain dovish and weigh on the dollar.”

“There are reasons to be cheerful for the prospects of the old continent. Markit's preliminary eurozone PMIs for May showed robust growth while the Unemployment Rate surprised by remaining at 8% in April. Inflation also marginally exceeded expectations in the old continent.” 

“On the vaccination front, Europe is accelerating its campaign while the jabbing pace in the US has slowed down markedly. COVID-19 cases have been falling sharply, nearly catching up with the low levels in the US.”

“Support awaits at the round 1.22 level, which capped EUR/USD last week. It is followed by 1.2175, which was a cushion last week, followed by 1.2160 and 1.2130.” 

“Resistance is at 1.2255, which was the high point on Tuesday. It is followed by 1.2266, May peak – and an upside target for the pair. Next, 1.23 awaits bulls.”