EUR/USD Posts Weekly Gain, Short-Term Perspective Improves
2022.05.22 16:06
The EUR/USD pair has managed to post a weekly gain even after Friday’s pullback amid broad dollar weakness despite the persistent risk-off mood in financial markets.
The EUR/USD hit a two-week high of 1.0607 on Thursday, but failed to consolidate above the 1.0600 level and was on track to close around 1.0550, down 0.23% on the day but recording a 1.4% gain for the week.
The main driver this week was a downward correction of the U.S. currency following nearly six weeks of uninterrupted gains. The dollar’s pullback took place despite the risk aversion dominating markets—and reflected by Wall Street indexes plunging—amid continued worries about inflation and how major central banks walk the tightrope trying to avoid stagflation.
Following the release of the European Central Bank Accounts on Thursday, it seemed clear that the ECB was poised to start policy normalization in July, but the question was whether President Lagarde and Co will take a gradual stance or follow the Fed’s steps by raising 50 bps.
From a technical perspective, the EUR/USD short-term outlook has improved after breaking above the 20-day SMA and with indicators gaining bullish tone on the daily chart. The RSI remains flat below its midline, but the MACD printed another green bar on Friday.
EUR/USD Daily Chart
However, the bias remains negative according to the weekly chart, although indicators are turning higher after correcting oversold readings.
A decisive break above 1.0600 could pave the way for a steeper correction, with 1.0640 as the next resistance, May 5 high, followed by the 1.0750 area.
On the other hand, loss of the 1.0470-60 zone could revive the bearish interest and send the EUR/USD to retest the YTD lows at 1.0348, exposing the 1.0300 psychological level.
EUR/USD Weekly Chart
