EUR - USD: the euro dollar rate could reach $ 1.30

By: Bharggavi Ssayee

May 28, 2021 12:11 am

The bullish pace of the euro dollar (eur usd) continues to develop in the forex market, against the backdrop of the correction of the US dollar against a basket of major currencies and a cycle of outperformance of shares of the Euro zone vis-à-vis Wall Street.

The US Dollar under pressure from the US labor market

Market interest rates have not been rising since the beginning of March in the United States, despite a strong economic recovery (the United States economy has already returned to its pre-crisis level, at the difference of the large countries of the Euro Zone) and a surge in the price of certain raw materials, like the price of wood in connection with the dynamism of US residential real estate.

The federal government's fiscal stimulus plans have largely targeted the real estate construction sector, generating new all-time records on several commodities, a phenomenon at the heart of the inflationary pressures that worry the United States Federal Reserve (FED). The rise in the price of raw materials has stabilized in the short term and above all, the labor market is starting to slow down in its capacity to create jobs. The conjunction of these two fundamental factors rules out any scenario of a tightening of the Fed's monetary policy this year, which has revived the bearish momentum of the US dollar against a basket of major currencies.

The continued uptrend in the euro dollar price since its rebound from technical support at $ 1.17 is the first consequence.

These are therefore monetary policy reasons that have kept the US dollar under pressure since the onset of the health crisis. As for the price of the single European currency, it is supported in the short term by the synchronized reopening of the major economies of the Euro Zone, as well as a phase of catching up still in progress of the actions of the Euro Zone vis-à-vis Wall Street.

In the end, this results in a succession of bullish technical signals on the eur usd rate which is in the process of exceeding the resistance of $ 1.2240. The immediate bullish target is still at $ 1.2350, the overflow of which would open the path to $ 1.25 and then $ 1.30 this year.

Chart showing the Japanese weekly and daily candles against the euro dollar rate