EUR/USD took advantage of dollar weakness to hit the highest since January but has since retreated from the highs. Buy the dip? Fed dovishness and plunging EU covid cases point to fresh highs, according to FXStreet’s Analyst Yohay Elam.
There are several reasons to expect further gains
“There is nothing to indicate that the slide in the dollar has come to an end. Federal Reserve officials have reiterated their message that rising inflation is probably transitory and that the economy still has a long way to go. The latest to support this view was Charles Evans and Randal Quarles – the latter is a permanent voter and is set to speak again on Wednesday.”
“In the old continent, there are reasons to be cheerful. Coronavirus cases are falling sharply, showing that the accelerating vaccination campaign is bearing fruit. Another ramp-up in immunization is expected in June, as the summer tourism season begins, providing additional hopes for recovery.”
“What could stop the rally? Perhaps concerns from the European Central Bank on the increase in the exchange rate could down the enthusiasm, but that would have to wait for the ECB’s next meeting on June 10. In the US, better economic data would support the dollar, and perhaps that could come on Thursday. However, the calendar on Wednesday is light, leaving the Fed doves to weigh on the greenback.”
“After breaking above the touch triple top at 1.2245, EUR/USD reached a new high of 1.2266. Above 1.2266, the next levels to watch are 1.2280 and 1.2350, both dating back to the turn of the year.”
“Support is at round 1.22, followed by 1.2175 and 1.2155 – all were stepping stones on the way up.”