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Moving averages keeping EUR.USD supported

EUR/USD Keeps Increasing, As Business Climate Keeps Improving in Europe

Posted Tuesday, May 25, 2021 by
Skerdian Meta • 2 min read

EUR/USD has been bullish since March last year, climbing to 1.2350s by January, but in Q1 we saw a retreat lower in this pair, which took the price 650 pips lower until the end of March. The retreat ended as the USD turned bearish again and in the last two months we have seen some bullish pressure again in this pair.

So, EUR/USD has been climbing higher again since early April and moving averages have been doing a great job providing support on the H4 chart. The economic situation is improving in Europe as the business climate indicator showed earlier today, which is keeping the pressure to the upside for this pair. We have been trying to buy the dips in EUR/USD and today’s report reinforces that bias. Below is the report:

Business Climate Report by Ifo – 25 May 2021

  • May Ifo business climate index 99.2 vs 98.0 expected
  • Prior 96.8; revised to 96.6
  • Current assessment 95.7 vs 95.5 expected
  • Prior 94.1; revised to 94.2
  • Expectations 102.9 vs 101.0 expected
  • Prior 99.5; revised to 99.2

Slight delay in the release by the source. A solid beat on the headline and expectations reading as this largely reaffirms the more optimistic sentiment surrounding the German economy as we look towards 2H 2021 in particular.

As virus cases trend lower and vaccine progress is continuing, there is room for optimism as business and investor sentiment start to improve in Europe’s biggest economy.


Comments from Ifo Economist, Klaus Wolhrabe

  • Economic upswing is gathering pace
  • German economy should grow 2.6% in Q2 vs Q1
  • Sees German economy growing 2.8% in Q3
  • Expectations in tourism, hospitality has exploded in May
  • High hopes for a good summer
  • Rising costs for raw materials are increasingly being passed on
  • Many companies are saying that they plan to hike prices

This follows the Ifo report earlier. I’m bolding the comments which are tied to inflation, as that may be something for the ECB to consider in case price rises stay the course. Besides that, the message is one of optimism towards the outlook in 2H 2021 with many anticipating a summer reopening and travel across the region.

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