On Friday, euro/dollar currency pair reached a new maximum value since the beginning of March this year and came close to the resistance level of 1.2100.
Strong macroeconomic statistics from the US and strong quarterly reports from local companies could not help the US currency. As a result, the dollar index fell by about 0.5% and closed with a fall for the third week in a row, which was the longest downtrend since December. The main reason was the initiative of US President Joe Biden to raise taxes on capital gains. If the proposal is passed by lawmakers, it is likely to further weaken the dollar. According to analysts at ING, tighter fiscal policy will encourage the Fed to more liberal monetary policy, and ease fears of a new sell-off in US bonds. This situation will favour the dollar's decline throughout 2021. However, the current weakness of the US currency is still mainly an adjustment to the strong growth in the first quarter.
The ECB's second-quarter survey showed a downward revision of real GDP expectations for this year and an upward revision in 2022, suggesting a further delay in the recovery. Inflation forecasts were raised by 0.7% in 2021, but remained unchanged in 2022 and 2023. Expectations suggest a return of GDP in 2022 above the level of 2019. However, this would still be 2.6% lower than the previous forecast. The average long-term expectations for real GDP growth remained unchanged at 1.4%. The unemployment profile was revised downward for 2021-2023, but long-term expectations were unchanged at 7.4% for 2025, suggesting a slightly less pronounced downward trajectory overall.
Trading signal EUR/USD
In the forecast, I expect a reversal and a decline in euro/dollar to the levels of 1.2075, 1.2050 and 1.2030.