EUR/USD: Further Gains, But a Correction May Be Imminent
Investing.com
Published May 31, 2022 17:30
By David Wagner
Investing.com - The EUR/USD rose again yesterday, peaking at 1.0787 last night, although the momentum seems to be slowing compared to previous sessions.
Moreover, at the time of writing at 6 am GMT, the Euro Dollar is down from its recent highs, currently at 1.0750.
The positive tone on the Asian and European stock markets has contributed to a positive risk appetite for the Euro, but the lower opening of the US futures indices yesterday, after a bank holiday, tarnishes this optimism.
It should also be remembered that the rise in the EUR/USD from around 12 May corresponds to a move back in the dollar from multi-year highs, as seen in the Dollar Index.
However, the daily chart of the Dollar Index suggests that this correction may be over, as the index is approaching a support line that has been in place for several months.
The risks of a correction in the EUR/USD pair from the current rates, therefore, seem very real. Moreover, the opinion of the banks regarding the Euro Dollar remains mixed, if we take into account the notes published yesterday.
The rebound is capped at 1.0835, and a relapse to parity is likely according to Credit Suisse; no case for a return to 1.10 according to ING.
Credit Suisse analysts said they expected a return to the downside, with an initial target of 1.0608/0599, then 1.0350/41, or even parity, and believe that resistance at 1.0835 should be a limit:
"EUR/USD is still capped at 1.0770/0835. With five different resistances in this area, we expect this area to act as a very hard barrier and look for the medium-term downtrend to reassert itself from here."
On the downside, the bank believes that "support remains at 1.0642", before "1.0608/0599, with the possibility of a retest of 1.0350/41 thereafter. Ultimately, we see a possible fall towards the 0.99 parity, with the market still in a clear medium-term downtrend."
ING Bank also issued a cautious note yesterday, explaining, "We do not believe there is a strong case for EUR/USD to move back towards and above 1.10."
Finally, it should be noted that EUR/USD traders will have to deal with a busy economic calendar this Tuesday, with German Unemployment, Eurozone CPI, and US Consumer Confidence.
Find a list of all the important statistics for EUR/USD today in our economic calendar .
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