EUR/USD: what to expect?
Kira Iukhtenko, FBS
EUR/USD made another bullish move on Tuesday, hitting $1.3950. The greenback lost most of its shine on the back of the falling US yields. On Wednesday the market is consolidating the yesterday’s growth and waiting for the major events – Fed’s Yellen speech tonight and the ECB meeting tomorrow.
In our view, Mrs. Yellen is unlikely to influence the trade direction today. She is expected to repeat the dovish comments about the low inflation and weak labor market (supportive for EUR/USD). As for the ECB on Thursday, monetary policy will stay unchanged. A rate cut is widely expected in June, so Mr. Draghi may start preparing the investors for that. However, dovish rhetoric is not enough to impress the euro-bullish market.
What to expect from the pair in the coming days? Given the euro’s resilience – the currency simply ignores all the negative news – we see room to test $1.4000 this week. Strong resistance for the pair lies at $1.3967 (the 2014 high). Note that the market is overbought, however. There is a MACD divergence on a daily chart. We still put long-term bullish prospects of the pair on doubt. Support lies at $1.3800/3780 and $1.3660.
Chart. Daily EUR/USD