EUR / USD fell to its lowest level since April 23, when the US dollar recovered. It fell to 1,200, 1.25% below its peak this year.
US dollar recovers
EUR / USD is falling mainly due to the overall strong US dollar. The dollar index is up more than 0.45% today. It was up 0.45% against the Swiss franc, 0.60% against the Swedish krona and 0.40% against the Canadian dollar.
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This result is likely driven by the forex traders’ desire for safety. wait for the upcoming US nonfarm payrolls data due Friday this week. Indeed, the yield on bonds rose: on 10-year bonds – by 1% to 1.621%, and on 30-year bonds – to 1.63%. Analysts believe that the very positive employment figures will cause the Federal Reserve to start talking about tightening.
The strong US economy also plays a role in the strengthening of the dollar. Data from Markit and the Institute for Supply Management (ISM) showed that the country’s manufacturers are doing well. However, many of them face serious problems and high supply prices. There have been many reports of problems many companies are facing due to ongoing delivery issues.
Data released today showed that the US trade deficit continues to widen. In March, the country exported over $ 200 billion worth of goods and imported $ 274 billion worth of goods. This led to a huge trade deficit of over $ 74 billion. This result was mainly due to incentives for importers to buy more overseas.
Meanwhile, the euro / dollar rate is also falling due to the divergence of the US and eurozone economies. Data released yesterday by Markit showed that the eurozone manufacturing sector is facing serious problems. The block is also struggling with the slow introduction of the vaccine.
EUR / USD Forecast
In my May forecast for the EUR / USD pair, I said that the price will rebound slightly and then resume the downtrend. This rise was necessary for the pair to form the right shoulder of the head and shoulders pattern. This happened and the pair dipped below last week’s low of 1.2013.
The pair is trading between 23.6% and 38.2% Fibonacci retracement levels. It is also supported by 25-day and 50-day weighted moving averages (WMA). The pair is therefore likely to fall further as bears target a 50% retracement at 1.1925, the lowest level since April 13.