The euro-dollar pair is in no hurry to conquer new price peaks. Following the results of the dovish Federal Reserve meeting, the price updated the two-month high (1.2150), but then began to slowly slide, waiting for new information drivers. Apparently, yesterday's surge was a surprise not only for the bears, but also for the bulls. For the first time since February of this year, traders indicated their claims to the 22nd figure, although they did not even approach the boundaries of this price level. Nevertheless, the EUR/USD bulls made a serious bid for victory, confirming the strength of the upward trend.
The EUR/USD pair retreated due to the growth of the 10-year Treasury yield. The debt market reacted to the latest report on US economic growth in the first quarter of this year. And although the results fell short of the forecast level, it reflected the serious pace of the recovery process. The volume of US GDP increased by 6.4% in the three months of 2021 (with growth forecast to reach 6.8%). That is, on the one hand, the indicator came out in the red zone, but on the other hand, it showed growth (in the 4th quarter, GDP increased by 4.2%). The base RFE also fell slightly short of forecasts (2.3% compared to the forecast of 2.4%). But consumer spending on durable goods jumped up – the indicator rose immediately by 41%, while last month this component was in the negative area (-1.1%). The GDP price index also exceeded the forecast level almost twice – with growth forecast to reach 2.6%, it rose to 4.1%. Foreign trade indicators showed a very modest result: imports increased by 5.7%, exports decreased by 1.1%.
In general, the latest report was quite strong. However, the dollar initially ignored it, keeping in mind the main theses of yesterday's Fed meeting. Dollar bulls only showed signs of life after the yield of 10-year treasuries updated the 2.5-week high. However, the greenback's growth is uncertain: the US dollar index is still within the 90th figure, and the euro-dollar pair is still within the 21st figure. All this suggests that the strong data on the growth of the US economy allowed the EUR/USD bears to only go for a correction, while a trend reversal (at the moment) is out of the question.
The fact is that the Fed assured traders that the central bank will maintain the current parameters of monetary policy even if the main macroeconomic indicators will grow exponentially. Fed Chairman Jerome Powell, like most of his colleagues, is confident that the positive dynamics will soon exhaust themselves – and by the end of this year, the growth momentum will fade. Let me remind you that according to the Fed's March forecast, the US economy will grow by 6.5% in 2021, and by only 3.2% in 2022. And the forecast of US GDP growth for 2023 was completely worsened by the central bank – to 2.2%. In light of such prospects, Powell assured journalists that the Fed will maintain the pace of asset repurchases "until significant, and most importantly – sustainable – progress is achieved."
It is for this reason that the key macroeconomic indicators of the United States, figuratively speaking, "do not work" - that is, they practically do not affect the dollar's dynamics. We can say that this is the " know-how "of the post-crisis period, when the Fed, despite the growth of the main indicators of the economy, voices dovish rhetoric (and, accordingly, maintains the policy of monetary stimulus). Therefore, the greenback's position is so shaky, although today the dollar has received situational support.
The European currency also received support from today's macroeconomic reports. German inflation surprised with quite strong figures, which became a harbinger of the growth of pan-European inflation. Thus, on a monthly basis, the overall consumer price index continued its upward trend in April, rising to 0.7% (with growth forecast to reach 0.5%). There is also a positive trend on an annualized basis: the index has been growing consistently over the past four months, and today it has reached a two-percent mark with a growth forecast of up to 1.9%. The regional reports of the German CPI reflected a widespread improvement in the annual inflation rate. The harmonized consumer price index also showed a fairly strong result, both in monthly and annual terms. The positive picture was supplemented by German unemployment, which remained at 6%, contrary to forecasts of growth to 6.2% (this is despite the fact that strict quarantine restrictions still apply in Germany).
And so we are witnessing a corrective downward pullback after an impulsive growth. The support level is located at 1.2050 (Tenkan-sen line above the daily chart). The growth scenario will only lose its relevance if the pair goes below this target. In general, the upward trend remains in effect: the main target is located at 1.2180, which corresponds to the upper line of the Bollinger Bands indicator on the same timeframe.
