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FX.co ★ EUR/USD: USD may unexpectedly change. Fed's meeting to affect USD?

EUR/USD: USD may unexpectedly change. Fed's meeting to affect USD?

EUR/USD: USD may unexpectedly change. Fed's meeting to affect USD?

The euro showed one more jump and the euro/dollar pair reached the high of 1.2116. Bulls of the euro failed to hit a new high as the price dropped. At the beginning of the week, news flow was rather weak.

Germany's Ifo indicator data was one of the most important reports. However, all three components turned out to be below the forecast. Under the current economic conditions, the euro/dollar pair will find it difficult to consolidate above the psychological level of 1.2000.

In the first quarter of the year, the eurozone is likely to slide. From the technical point of view, the eurozone economy will enter recession again. The largest eurozone economy may decline by 1.5%. In the current quarter, the situation will hardly change. In April, Germany's authorities introduced new lockdowns. Judging by the epidemiological situation, such measures could be taken in May.

This year, the tourist season will hardly bring money. This sector is one of the main drivers of GDP of most eurozone countries. At the moment, the US economy looks much healthier.

This could be proved by the publication of the US preliminary GDP data. According to the forecast, the US GDP may increase by 6.1%. It will be the third fastest growth since the third quarter of 2003. In the fourth quarter of 2020, the indicator advanced by 4.3% and in the third quarter of 2020, it surged by 33.4%.

In April, the consumer confidence index jumped to 121.7 points, reaching the highest level since February 2020 just before the pandemic.

A fast economic recovery in the US may lead to the fact that the US Fed will tighten its monetary policy earlier than the ECB. Notably, in March, the ECB significantly expanded its QE program. This action should have put pressure on the euro. However, the single currency surged above 1.2000 against the greenback. The rise has just a speculative nature.

Wednesday is an important day for the euro/dollar pair. Christine Lagarde is expected to provide a speech. However, most traders are likely to be focused on the press conference held by Fed Chairman Jerome Powell.

The FOMC members should recognize the continued acceleration in the economy. However, they may not provide information about the conditions under which they will stop their QE program. At the same time, even a hint that the Fed may take such a decision, will lead to the rally in the US dollar.

Traders are likely to be focused on the press conference, as any comment is important for the further movement of the greenback. During this period, volatility could become really high, if the key interest rate decision is against the forecast or in case of unexpected announcements. A more hawkish policy will boost the US dollar, whereas the dovish one will put additional pressure on the national currency.

On Wednesday, traders should be cautious as mass media may make a big deal out of a molehill. The Fed's meeting is not the only factor. The US government starts discussions of Joe Biden's plan of higher taxes.

At the same time, the US dollar index is likely to go on falling.

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EUR/USD: USD may unexpectedly change. Fed's meeting to affect USD?

The euro/dollar pair may show a downward correction losing 1%. This situation could be used to increase the volume of positions against the USD. The same corrections are possible in other pairs containing the US currency.

Notably, the euro will hardly nosedive, resuming its mid-term downtrend. Now, the euro is not as hopeless as it was in the first quarter. In the EU, the vaccination pace is becoming faster and the effect of the fiscal support will mainly be seen in 2021.

On Tuesday, the euro closed above 1.2060, providing buyers with a strong signal. If the pair remains stable, it will have all chances to climb to 1.2200. However, the situation is shaky. Various events may significantly support the US dollar. In this case, the pair may decline below 1.2060 and fall even deeper.

EUR/USD: USD may unexpectedly change. Fed's meeting to affect USD?

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade
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