Technical Analysis

EUR/USD Analysis – May 07, 2021

By LonghornFX Technical Analysis
May 7, 20213 min

Double Top Pattern in Play!

The EUR/USD was closed at 1.2064 after placing a high of 1.2072 and a low of 1.1992. After falling for two consecutive sessions, EUR/USD managed t return to the positive territory. The renewed bullish momentum in the pair came exclusively in response to the increased selling pressure surrounding the dollar, particularly after somewhat disappointing data from the ADP report and dovish comments from FOMC. The members of the Federal Reserve talked down the chances of tapering and reiterated the idea that the rise in inflation was temporary. On the data front, At 11:00 GMT, the German Factory Orders in March surged to 3.0% against the forecasted 1.5% and pushed Euro higher that added in the gains of EUR/USD pair. At 14:00 GMT, the Retail Sales figures increased to 2.7% against the forecasted 1.5% and supported Euro that pushed EUR/USD higher.

From the U.S. side, at 16:30 GMT, the Challenger Job Cuts for the year came in as -96.6%. Last week, the Unemployment Claims fell to 498K against the estimated 540K and supported the U.S. dollar that caped upside momentum in EUR/USD. The Prelim Nonfarm Productivity for the quarter surged to 5.4% against the forecasted 4.3% and weighed on the U.S. dollar that added strength in rising EUR/USD prices. Prelim Unit Labor Cost for the quarter rose to -0.3% against the projected -1.1% and supported the U.S. dollar that limited EUR/USD pair gains.

On Thursday, European Central Bank President Christine Lagarde said a need to develop a green capital market union in Europe to generate cash for sustainable investment and remain the location of choice for investors issuing green debt. Europe is aiming for a leading role in the shift to sustainable growth, and the European Union was planning to issue 225 billion Euros of green bonds as part of a recovery project. However, the bloc’s capital markets remain relatively underdeveloped.

The currency pair EUR/USD advanced above 1.2071 after several FOMC members dismissed chances of a Federal Reserve move to taper. Dallas Federal Reserve Bank President Robert Kaplan said that he would like to start talking about tapering sooner than later, but he was not a voting member. On Thursday, Chicago Federal Reserve Bank President Charles Evans showed his worries about reaching the Fed’s 2% inflation goal despite being much more optimistic about the U.S. economic growth and unemployment than just a few months ago. He said that he expects the monetary policy to remain super easy for some time. These comments weighed on the U.S. dollar and pushed EUR/USD pair higher on the day.

EURUSD Intraday Technical Levels

Support Resistance

1.2014 1.2094

1.1963 1.2123

1.1933 1.2174

Pivot Point: 1.2043

EUR/USD - Technical Outlook

The EUR/USD’s made an excellent bullish movement to test the double top resistance level of 1.2067. Recently, the pair has closed a Doji candle below 1.2067 resistance level, and typically such a pattern drives bearish correction in the pair. That said, the EUR/USD’s support stays at 1.2030 and 1.2005 levels. Conversely, a bullish breakout of 1.2067 opens up additional room for buying until 1.2084 and even higher until 1.2125 regions. The primary focus will stay on the U.S. NFP figures as it has the potential to drive dramatic price action in the EUR/USD pair. Economists are expecting Non-Farm Employment Change to soar to 990K vs. 916K beforehand. While the Unemployment rate is forecasted to drop from 6% to 5.8%, such results support the U.S. dollar and drive a bearish trend in EUR/USD. All the best!


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