The EURUSD has been stalling last week after climbing back to its February high of around 1.2243. The euro temporarily broke above that resistance on Tuesday, but quickly fell back below it.

The Forex market was much less ‘taken away’ than the bond markets and the stock market indices last week as spreads on the dollar remained modest despite a flurry of figures which were considered to be real market movers.

The PCE inflation figures for the US on Friday showed that the rate of inflation increased by +0.6% sequentially to reach +3.6% (and +3.1% excluding energy and food), levels not seen in 30 years.

In addition, consumer spending in the US rose by 0.5% in April compared to the previous month, according to the Commerce Department, an increase higher than the +0.1% to +0.2% expected.

This is a solid spending figure even as incomes fell by 13.1% but it is a slightly smaller drop than the one expected by economists on average (-14%). The Chicago PMI came in much stronger than expected at 75 versus a consensus of 68 and consumer sentiment came in as expected at 83.

The Euro has not been affected by the poor French statistics however. GDP growth was first expected at +1.5% in the Q1 (which should have erased the -1.5% of the previous quarter), then revised to +0.4%, it finally comes out negative by -0.1%.

And the second quarter is not off to a strong start, with the April confinement resulting in a drop in French household consumption expenditures (-8.3% in volume compared to March).

Consumer prices rose by 1.4% in May 2021, after an annualized inflation rate of +1.2% observed the previous month, according to the provisional one-year estimate made by INSEE at the end of the month.

From a technical perspective, the outlook for the EURUSD is bullish as long as it remains above its support at 1.2160. A decline below the bullish oblique that runs through the April and early May lows would be a first bearish signal, but a continuation of the decline below the support at 1.2160 would open the way for a retracement to the May 13 low at about 1.2050 or even the symbolic threshold at 1.20.

Conversely, a break above the recent high at around 1.2243 would strengthen the bullish outlook and pave the way for a continuation of the trend to the January high at around 1.2350. Traders should keep an eye on the price action towards the 1.216 channel and consider entering short positions as the EURUSD crosses below the area between its 20 day MA and the 0.382 Fibonacci retracement level.

Support & Resistance Levels:

R3       1.2550
R2       1.2340
R1       1.2262
S1        1.2160
S2        1.2000
S3        1.1985

Analyzed by: Mr. Thibault Moirez, Independent Analyst