EUR/USD is rallying as the US dollar remains on a downtrend. The decline is a result of Fed’s successful efforts to downplay inflation fears. St. Louis Fed President, James Bullard, Atlanta’s Fed President, Raphael Bostic, and Governor Lael Brainard are the latest Fed officials to justify the central bank’s accommodative policy. During an interview on CNBC, Bostic stated the need for unemployment to decline before tightening the monetary policy.
The Fed officials’ remarks have pushed Treasury yields lower. At the time of writing, the benchmark 10-year US bond yields had dropped by 0.85% to 1.59. 30-year US bond yields also fell by 0.65% while the shorter 5-year yields declined by 0.64%.
EUR/USD is also finding support in Germany’s business confidence figures. On the one hand, the country’s GDP data for Q1’21 missed the estimated contraction of 1.7% by coming in a point higher at 1.8%. In 2020’s last quarter, the economy had expanded by 0.3%.
The lower-than-expected numbers are attributed to the lockdown measures enacted by the German government to deal with the soaring coronavirus cases. However, as the economy reopens, business confidence has risen to 99.2 compared to April’s 96.6. Analysts had expected a reading of 98.2.
EURUSD Technical Forecast
EUR/USD has moved past the resistance level at 1.2241. At the time of writing, it was up by 0.25% at 1.2246. On a 4-hour chart, it is trading above the 25 and 50-day EMAs. However, it has formed a rising wedge, which is usually a bearish pattern. As such, I expect the currency pair to rise to around 1.2276 before declining to find support at 1.2221. A move above 1.2276 will invalidate this thesis.
Follow Faith on Twitter.