The euro-dollar pair ignores all fundamental events – both buyers and sellers are actually frozen in place. After two days of consecutive growth, the pair stopped, not daring to storm the 20th figure. The EUR/USD bears also look confused, despite the strong macroeconomic reports that were published in the US today. In general, "they can't go up, they don't want to go down."
The situation is stalemate, as the dollar is under pressure from the dovish rhetoric of the Fed and the current situation with the Johnson & Johnson vaccine. The European currency, in turn, lacks arguments to overcome the key resistance level of 1.2000. This is a psychologically important target, which coincides with the upper line of the Bollinger Bands indicator on the daily chart, as well as with the lower border of the Kumo cloud on the same time frame. Overcoming this "round" level will bring the pair back to the 20-figure area and actually mark a trend change. The single currency is not yet ready for such changes, although the fundamental background for the euro has improved in many ways. And yet investors are not ready to invest in the euro, and especially when paired with the greenback. The risks of falling back into the area of the 18th figure are too high-primarily due to the sharp strengthening of the US dollar.
By and large, dollar bulls are now experiencing "post-holiday syndrome." For several weeks, the US dollar has been growing thanks to rumors around Joe Biden's new economic plan, which was supposed to amount from 3 to 4 trillion dollars. And when the rumors became reality, the dollar came under pressure given the problems that arose. First, the volume of the bill was lower than expected ($ 2.6 trillion). Second, Biden will have to make concessions to get it approved in Congress. Most likely, the announced "price tag" will be revised, and naturally downward. In the end, the greenback became a victim of the "Buy the rumor, sell the news" trading principle. Joe Biden's ambitious economic plan has been supporting the dollar for several weeks - exactly as long as until the bill gets bogged down in political bargaining. According to the American media, Joe Biden intends to hold political consultations on this issue by the end of May - first with the Republicans, and then (in case of failure) with his fellow party members. That is, this fundamental factor will serve as an "anchor" for the greenback for several more weeks.
The second problem of the US dollar is the Fed. At the beginning of the year, dollar bulls reacted quite violently to the growth of key macroeconomic indicators. Rumors circulated in the market that Jerome Powell was about to hint at the early winding down of QE to prevent the American economy from overheating. But the head of the Fed refutes these rumors with enviable regularity, assuring the market that the current parameters of monetary policy will not undergo any changes in the foreseeable future. Just yesterday, he said that the interest rate is likely to be increased in 2023 - but not until the end of 2022. QE's fate may be decided sooner - but certainly not during this year. A similar position was voiced by many of Powell's colleagues, even by representatives of the "hawkish" wing of the Committee.
As a result, the market changed its attitude towards macroeconomic releases, simply ignoring the published data (or showing a short-term reaction). For example, at the end of last week, the greenback ignored the inflation release, and earlier actually ignored the strong Nonfarm. Today, market participants remained indifferent to the release of data on the volume of retail sales in the United States. Although the indicator updated almost a year's maximum: the overall indicator jumped to 9.8%. This is the best result since May last year. Excluding car sales, this indicator also updated its multi-month high, rising to 8.4% (the best result since June last year). American consumer activity is growing amid a large-scale campaign to vaccinate the population against coronavirus. Here you can recall the recent report published by the Bloomberg agency. Experts estimate that consumers around the world have accumulated $2.9 trillion during periods of lockdowns and quarantine restrictions. At the same time, about half of these funds - that is, about $1.5 trillion - were accumulated directly by American consumers. According to some analysts, in the second half of this year, the Americans will release these funds, thereby accelerating inflation indicators.
Thus, there is a stalemate for the EUR/USD pair. On the one hand, recent releases are ignored by dollar bulls because of the dovish position of the Fed. The members of the American regulator agree that the US economy is recovering at an active pace, but at the same time insist on the expediency of maintaining the current monetary policy. On the other hand, the above fundamental factors do not allow buyers of EUR/USD to enter the 20th figure and continue the upward offensive.
In the face of such uncertainty, at the moment it is most advisable to take a wait-and-see attitude. The pair has come close to the strong resistance level of 1.2000, so buying looks risky: the EUR/USD bulls, as we see, do not dare to storm the 20th figure. The dollar, in turn, also looks vulnerable, as traders ignore positive macroeconomic reports, and all other fundamental factors are not in favor of the greenback (political passions around the Biden bill, problems with the Johnson & Johnson vaccine, decrease in Treasury yields). Given such a controversial background, the scales may swing both towards the dollar and towards the euro (due to the further weakening of the US dollar).
