The euro-dollar pair again tested the third figure on Monday, but failed to settle in this price area. Apparently, traders are afraid to keep short positions below 1.0400, so as soon as the price crosses this price line, they take profits, thus repaying the downward momentum. However, EUR/USD bulls are also in no hurry to develop the upward movement - the current fundamental background does not contribute to the price growth. On the contrary, the market is increasingly talking about a possible parity that can be achieved in the foreseeable future. To do this, the bears need not only to break through the support level of 1.0340 (5-year low), but also to settle below this target. This will allow bears to test the second figure, from where parity, as they say, is within easy reach. Here it is necessary to recall that in three months the bears made a march-throw a thousand points long. Therefore, they will overcome the 200-point price segment without any difficulty - if, of course, they overcome the aforementioned price barrier.
In other words, the main task of EUR/USD bears is to overcome the price area of 1.0350-1.0340. As you can see, traders need additional information support. The current fundamental background allows them only to test the area of the third figure, but does not help to go further, to the main support level. In view of this fact, it should be noted that it is advisable to enter short positions only on the waves of corrective rollbacks. Short positions look extremely risky in the "lower" price points, that is, in the range of 1.0400-1.0380 (and below). As you can see, despite the strength of the downward trend, the bears do not yet risk approaching the support level of 1.0340.
Nevertheless, it is advisable to use any corrective surges to enter shorts. The dollar retains its appeal due to increased anti-risk sentiment (weak macroeconomic reports from China, lack of progress in Russian-Ukrainian negotiations, an announced course towards NATO by Switzerland and Finland) and growing hawkish expectations regarding the next steps of the Federal Reserve (against the background of today's speech by Fed Chairman John Williams).
China just published a block of macroeconomic statistics, the main components of which came out in the red zone. For example, the volume of investments in fixed assets grew by only 6.8% (against the forecast of growth by 7.5%). This figure has been falling for the second consecutive month. The volume of industrial production declined altogether - by almost 3% (for the first time in two years, the indicator fell into the negative area). The retail sales indicator disappointed. It collapsed to -11%. The last time sales showed such a sad result was in April 2020, when the coronavirus was raging in the country. It is also worth noting that sales sank amid rising unemployment. China's unemployment rate has risen for the fifth consecutive month, hitting 6.1% in April.
Disappointing macroeconomic indicators increased investors' concerns. The dollar, in turn, became the beneficiary of the situation, due to the growth of anti-risk sentiment in the foreign exchange market.
Fuel to the fire was added by the most influential representative of the Fed - the head of the Federal Reserve Bank of New York, John Williams. He reiterated that high inflation is "the number one problem" for the Fed. According to him, recent geopolitical events, as well as the outbreak of COVID-19 in China, provoke global inflationary growth, including in the United States. At the same time, he assured journalists that the Fed would "actively oppose" this process. Williams did not begin to speak in more detail about the central bank's plans, but last week he clearly outlined his position. He said a 50 basis point rate hike "in the next two meetings" makes sense, while assuming a nominal neutral rate of 2.5-3.0%. He also de facto did not rule out a more aggressive pace of monetary tightening, saying that "the Fed will adjust its policy depending on the circumstances."
Thus, the main signals of a fundamental nature allow us to speak about the priority of the downward movement of EUR/USD. The euro is still under pressure, so corrective pullbacks are mainly due to profit taking by traders when the price approaches the middle of the 3rd figure. At the same time, bears do not allow the pair to "go far": in the area of 1.0440-1.0480 they again enter the game, opening short positions with targets of 1.0400-1.0370-80.
From a technical point of view, the downward scenario also looks like a priority. On the daily chart, the EUR/USD pair is between the middle and lower lines of the Bollinger Bands indicator, as well as below all the lines of the Ichimoku indicator, which shows a bearish Parade of Lines signal. The first target is the level of 1.0400 (with a corrective rollback to the area of 1.0450-1.0490). The main goal is the 1.0350 target (bottom line of the Bollinger Bands on the D1 timeframe).
