EUR/USD has been edging lower after weak German GDP and rising US yields. Yohay Elam, an Analyst at FXStreet, explains why this slide may be more than a casual correction.
See: EUR/USD set to climb towards the 2021 high at 1.2349 – Commerzbank
The slide from 1.2150 to 1.21 is probably not the usual “buy the dip” opportunity
“Friday is the last end of the week and also the final day of April, and that means that money managers may be adjusting their portfolios. At current levels, the currency pair is some 400 pips off the levels at the beginning of the month, implying room for a downward correction.”
“The bearish bias around the dollar is fading. Friday’s data dump includes the Core Personal Consumption Expenditure (Core PCE) which is the Fed’s preferred measure of price rises. An increase is on the cards.”
“Optimism about Europe’s vaccination catch-up is beginning to be priced in. On the other hand, the old continent has a long economic recovery – the German economy shrank by 1.7% in the first quarter, worse than expected. When the eurozone’s ‘locomotive’ slows down, the entire area shivers.”
“Initial resistance awaits at the previous April high of 1.2117. It is followed by the monthly peak of 1.2150. Support is at 1.2080, another swing high on the way up, and then by 1.2050 and the psychologically significant 1.20 level.”