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EUR/USD about to re-capture 1.1000 – 1.1200 to come?

May 22, 2020 10:30

Source: Economic Events May 22, 2020 - Admiral Markets' Forex Calendar


While the economic calendar is quite thin for the weekly close, and market participants may expect forex volatility to be subdued in expectation of the upcoming US bank holiday next Monday, the EUR/USD faces an extremely interesting short-term resistance zone around 1.1000.

In fact, a break higher, with a dynamic stint and quick follow through as high as 1.1200, became likely over the last few days. Because, on Monday, Germany and France's Merkel and Macron proposed a 500 billion EU recovery fund that would offer grants to the European Union regions and sectors hit hardest by the coronavirus pandemic.

Indeed, one could see this as a first step towards a transfer union and in addition with the massive monetary stimulus from the ECB, recent Euro bullishness with further gains comes with no big surprise.

In addition to that, we see the US dollar staying under consistent pressure, and while we expect European yields to continue to rise, a sustainable drop in 10-year US Treasury yields below 0.60% is likely, too, resulting in a further narrowing of the yield differential between EU and US bonds, favouring gains in the EUR/USD.

Technically, a break above 1.1000 coincides with a break out of the trading range between 1.0750/0800 and 1.1000 since the beginning of April, resulting in a projected target on the upside around 1.1200/1250:

Source: Admiral Markets MT5 with MT5-SE Add-on EUR/USD Daily chart (between March 22, 2019, to May 21, 2020). Accessed: May 21, 2020, at 10:00pm GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2015, the value of the EUR/USD fell by 10.2%, in 2016 it fell by 3.2%, in 2017, it increased by 13.92%, 2018, it fell by 4.4%, 2019, it fell by 2.2%, meaning that after five years, it was down by 7.3%.


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