- The shared currency extends its rally for the second consecutive week and reaches a new high at 1.0691
- Bullish comments from ECB President Lagarde and risk appetite boost EUR/USD.
- EUR/USD Price Forecast: Failure at 1.0700 would open the door for more EUR/USD bearish pressure.
The EUR/USD is rising and approaching 1.0700, thanks to a softer USD trading tone, upbeat market sentiment and an additional boost provided by European Central Bank (ECB) President Lagarde saying a rise in types in July, it is possible. At the time of this writing, the EUR/USD pair is trading at 1.0673.
Risk appetite and a very aggressive ECB Lagarde lift EUR/USD
As mentioned, sentiment remains positive as European stocks are closing higher while US stocks are licking their wounds and paring some of last Friday’s losses. The coronavirus crisis in China intensified over the weekend in Beijing, while the situation in Shanghai improved, although 570 new asymptomatic and 52 symptomatic cases were registered.
EUR/USD received a boost from dollar weakness. The dollar index, a gauge of the USD’s value against a basket of its rivals, is down almost 0.80% to 102.218, a tailwind for EUR/USD. By contrast, US Treasury yields rose, led by the 10-year yield trading at 2.859%, gaining seven and a half basis points.
ECB President Christine Lagarde crossed the wires, saying the ECB is likely to be in a position to exit negative interest rates by the end of the third quarter, but opposed a 50 basis point hike. She added that she expects the net purchases to end early in the third quarter, which will allow the ECB to raise rates at the July meeting.
During the day, other ECB policymakers spoke to the media. The ECB’s Villeroy said eurozone growth is resilient and said the ECB’s main goal would be to bring inflation back to 2%. According to Bloomberg, some ECB sources said ECB President Lagarde’s plan to raise interest rates upset some ECB policymakers who want a faster option.
During the European session, the EU’s agenda highlighted the May IFO surveys on its various indices, which unexpectedly rose more than expected, showing the optimistic mood of German companies, although keeping the sentiment of investors on the rise.
Meanwhile, on the US economic calendar, the Chicago Fed national activity index for April was published, rising 0.47, above the 0.36 of the previous reading, and in addition, the president of the Fed of Atlanta, Raphael Bostic, made statements.
EUR/USD Price Forecast: Technical Outlook
The EUR/USD daily chart shows the pair with a bearish bias, despite having rebounded from the 20-day moving average (DMA), which is currently sitting at 1.0530. However, the rally seems to be overextended as it is above the upper band of the Bollinger band indicator at 1.0673, but the Relative Strength Index (RSI) above the 50 midline is pointing higher, with enough space before reaching overbought conditions.
To the upside, the first resistance on the EUR/USD would be the 1.0700 level. A break above would expose the 50 DMA at 1.0772, followed by 1.0800. On the other hand, the first major currency support would be the 1.0600 figure. A break of the latter would expose the 20 DMA at 1.0529, followed by 1.0500.
Technical levels
Source: Fx Street
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