The return of the service sector to expansion and the record growth rates of the manufacturing sector of the eurozone became more compelling arguments for the EUR/USD bulls than Christine Lagarde's dovish rhetoric following the ECB meeting. No matter how hard Lagarde tried to slow down the main currency pair, her words about the premature discussion of the PEPP rollback were not enough to drown the euro.

Of course, the currency bloc is not out of the woods yet. It has not coped with the pandemic, but the acceleration of vaccination in the EU is setting investors in a major mood. If Brussels achieves an ambitious goal and manages to vaccinate 70% of the EU population by the end of the summer, the acceleration of the eurozone economy will reward the EUR/USD bulls a hundredfold. That is why the strong statistics on business activity inspired them to launch new attacks. The PMI in the services sector rose above the 50 mark for the first time in the last 8 months, indicating expansion. The index of purchasing managers in the manufacturing sector has reached an all-time high.

Dynamics of business activity in the euro area

The euro has a very strong trump card - the acceleration of vaccination, which is already reflected in business activity and will certainly accelerate GDP. JP Morgan forecasts the eurozone economy to grow by 6% in the second quarter, and this fact cannot but please EUR/USD bulls.

Yes, Christine Lagarde has done everything possible to contain their attacks, but the reality is that optimism in the financial markets prevails, which is reflected in the position of the US dollar. In April, the greenback lost a key trump card – the treasury bond yield, which was growing by leaps and bounds in March. Active purchases of US debt obligations by Japanese investors and the market's understanding that the Fed will not just throw a white flag led to a decrease in yields, which was immediately taken advantage of by the EUR/USD bulls.

Now the markets are worried about the million-dollar question: when will debt rates rise again? From the point of view of global business activity, the potential of their upward movement is far from being revealed.

Dynamics of US bond yields and global PMI

Most likely, traders simply retreated after unsuccessful attempts to test the Fed's strength, however, as in the history of the ECB and the euro, they did not give up. As a rule, a strong economy leads to higher yields on sovereign bonds, and few would argue that the US economy is stronger than ever. The Fed expects it to grow by 6.5% in 2021, the IMF - by 6.4%, Reuters experts - by 6.2%. These numbers are the highest since 1984.

Thus, in the week by April 30, investors will be puzzling over the question of whether the Fed will be able to keep the US debt market rates in check. The answer may be received after the results of the FOMC meeting are known and the release of statistics on US GDP for the first quarter.

Technically, the renewal of the April high by the EUR/USD pair will create preconditions for the continuation of the rally in the direction of the targets on the Wolfe Wave parent pattern at 1.229 and 1.235. We continue to buy the euro on the breakout of resistance at 1.208 or on pullbacks.

EUR/USD, Daily chart