EUR/USD: outlook for May 1-5

EUR/USD opened the week with a bullish gap on the news that a pro-European candidate Emmanuel Marcon won the most votes in the first round of French presidential election. In the second round of the vote on May 7 Macron is expected to win against the Eurosceptic Marine Le Pen. Already at this point, many think that the European political risks have diminished. This is a bright spot for the euro.

Among other important things, we have to mention the European Central Bank’s meeting. The ECB left monetary policy unchanged. President Mario Draghi pointed out that euro zone’s recovery was increasingly solid and downside risks had diminished. On the other hand, he underlined that removal of the bank’s easing bias was not discussed, stressing the fact that inflation remains too low. This ambiguous statement led to a mixed response from the euro: the single currency declined, but later managed to pare the losses.

The European economic calendar for the upcoming days is light, there are only events of medium and low importance. Among them, pay attention to the region’s preliminary Q1 GDP. Main drivers for EUR/USD will come out of the United States, where will be a lot of market-moving releases, the Federal Reserve’s meeting, and some political news.

EUR/USD keeps attacking this year’s resistance line. A weekly close above the 50-week MA in the 1.0900 area will be a positive sign. The next obstacles for the bulls lie at 1.0995 (100-week MA) and 1.1057 (bottom of the daily Cloud). A significant weakness of the US dollar may bring the pair up to 1.1150. Support is at 1.0825 and 1.0770.

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Elizabeth Belugina