Forex. EUR/USD trading forecast and signal for today, May 3, 2021
The US Dollar rose sharply against Euro at the end of last week. The pair fell to the support level of 1.05. The rise in US equity yields, combined with the positive performance of US fundamentals, has helped USD to recover further from its recent multi-week lows.
According to the results of January–March 2021, the German economy shrank by 1.7% compared to the fourth quarter, when growth of 0.5% was recorded.
In annual terms, Europe's largest economy fell another 3% below its pre-crisis level after a record 11-year decline of 4.9%. If a year ago Germany was the main factor in the growth of the euro area, now the country's industrial output and construction volumes have sunk, and the cancellation of the VAT reduction has slowed down consumer demand.
Bundesbank notes that in January, industrial production fell by 2%, in February – by 1.5%, and in annual terms, the indicator collapsed by 6.4%. A key industry, the German auto industry, has been hit by a global chip shortage that could worsen in the second quarter, slowing the economic recovery even further. Analysts' consensus forecast of German GDP growth for the current year continues to deteriorate. In the autumn, it was expected to strengthen by 5%, but now only by 3.3%. At the same time, inflation in the country is accelerating, and in April, for the first time since 2019, the indicator was above 2%. Germany was followed by the entire euro area in a technical recession for two consecutive quarters. According to a preliminary estimate by Eurostat, the economy sank by 0.6% in January-March. Against this background, the situation in the United States is particularly advantageous, where GDP growth in the first quarter was 6.4% in annual terms. Therefore, the dynamics of the pair now looks extremely logical and convincing.
Trading signals for EUR/USD forex currency pair
In the forecast, EUR/USD is expected to decline to the levels of 1.2000, 1.1975 and 1.1950.