EUR / USD: Dust will settle, euro will fall

The EUR / USD pair started the new week neutral, staying close to the important resistance at 1.2200. Despite the correction last week, the euro remains in a bullish trend and holds up quite confidently. Long positions will remain relevant as long as the market is above the nearest support level on the daily timeframe, the lows of May 26-28. Professional players buy euros, their position converges with the technical picture of the market.
The euro is supported by the macroeconomic statistics for the eurozone published last week, which improved the mood of traders. The growth factor is still the weak dollar. Friday's data on the personal consumption spending index once again pointed to increased inflationary pressures in the United States. At the same time, the American Central Bank continues to ignore what is happening with prices, remaining an adherent of a soft policy.

EUR / USD: Dust will settle, euro will fall

A hot topic in the markets remains Joe Biden's preliminary plan to modernize infrastructure in the United States. He will demand an increase in state budget spending to $ 6 trillion next year. If the budget is adopted, inflation will hardly be avoided. For the dollar, this is a sign.
Despite the fact that representatives of the FRS are so convincing about the temporary rise in inflation, the market, apparently, does not really believe. For this reason, as well as due to the large volume of shorts in long notes, Treasury yields remain relatively stable.

A lot of data will be released this week related to this situation, including a report on the labor market. There will also be speeches by the leadership of the Central Bank from the US and Europe. Traders will keep their finger on the pulse, as the situation in the markets, based on the news, can change at the speed of light.
On Tuesday, traders of the EUR / USD pair will be interested in the data on the ISM industrial index in the US for May and the PMI in the manufacturing sector of the eurozone, Germany. Today is Monday - a difficult day in every sense of the word. The market is thin due to the US weekend. With a small volume, volatile movements can occur, bypassing the published data.

So, according to the preliminary event picture, the week should be eventful. Volatility will gradually increase by Friday.

What does all this mean for the euro and in which direction will it move next? It is hardly worth taking into account the current movement of EUR / USD, since public holidays in America and the UK provided the European currency with a break after Friday's fall. After everything settles down, the euro has reasons to resume its downward movement. First, because the American economy is recovering at a faster pace than Europe. The rise in US inflation may not be temporary.

Durable goods orders are an important indicator that the US economy is operating at full capacity. Here the figure jumped more than 2% in April.
Secondly, the situation in the Old World is not so "healthy". With the pandemic, it is better that the euro is put into quotes, but there is still potential damage from new strains of COVID-19. In this case, the single currency has yet to assess the possible delay in lifting lockdowns.

Germany today released a preliminary estimate of the consumer price index for May. In annual terms, the growth of core inflation accelerated to 2.4%. This may excite some of the hawks at the ECB. It is important to note here that the rise in prices in Europe lags far behind America. The ECB will not tighten its policy anytime soon.

The slowdown in the growth rate of the Chinese economy may also become a factor of pressure for the EUR / USD pair. On Monday, China released its May manufacturing activity index, which turned out to be weaker than expected. Against this background, market players can switch to buying the safe dollar.
FX24

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