The Euro/Dollar exchange rate on Forex again failed to gain a foothold above the strong resistance level of 1.2245 and fell to the level of 1.2215.
This week, the single currency rate reached new cycle highs. Despite the current pullback, the pair retains the potential for further ascent, given that the momentum indicators have not yet entered overbought territory. The dollar remains vulnerable as US Federal Reserve officials point to the temporary nature of the recent rise in inflation and give markets little reason to expect any meaningful normalization of monetary policy. The economic recovery outside the United States will further affect the US currency, especially with a negative real interest rate.
Germany's leading indicator reflects estimates of the economic outlook. The index rose to its highest level in two years. The accelerated roll-out of vaccination and the first steps towards economic recovery are clearly encouraging market participants. Industrial production in Germany should also accelerate, even as inventories decline. But it is possible that supply chain disruptions could erode German manufacturing and trade data in the second quarter. The potential spillover effects from the US fiscal stimulus, the recovery in the construction sector, and the fact that the manufacturing sector is still below pre-crisis levels suggest a high probability of a rapid recovery in the country's economy.
Signals for trading EUR/USD currency pair
The forecast assumes an increase in the Euro/Dollar exchange rate to the price values of 1.2245, 1.2270 and 1.2300.