Today, on May 7th, the common European currency is down by 0,09%. Still, this is just a reaction to the recent strong rally that resulted in setting a new high.
At the same time, the ECB is diversifying its investment portfolio in order to reduce the risks, which is also supporting the strengthening of the Euro. Despite the fact that the US economy is recovering after a tough winter, lower US bond yields make the American currency weaker by directing financial flows from the USA to Europe and other economies.
Yesterday, the OECD published its report, which is released 2 times a year. The forecast for global economic growth in 2014 was downgraded by 2,2% relative to the previous predicted value of 2,3% (given in November 2013).
The following factor are believed to be curbing the global economy: the Fed's curbing of the bond purchase program and its negative effect on emerging markets coupled with the instability of China's financial system and the geopolitical risks associated with Ukraine.
The forecast for the eurozone's GDP was improved. The figures are expected to improve by 1,2% in 2014 (for comparison's sake, the previous forecast was equal to 1,0%). In 2015, the eurozone's GDP may increase by 1,7%. The OECD strongly recommends that the ECB should cut the key interest rate from 0,25% down to zero while deposit rates should go negative.
Tomorrow, traders and investors will focus on the ECB meeting. The current eurozone inflation is equal to 0,8%, well below the 2% target set by the central bank. The ECB members will be discussing how a strong Euro may influence inflation amid positive economic data.
Some experts expect EURUSD to above 1,400 since they think that the ECB is unlikely to change its policies this time. However, they admit that the central bank may well start easing its monetary policy in June if the prices stop growing.
How can traders benefit from currency exchange rates?
According to Masterforex-V Academy, the H4 chart of EURUSD shows us the time period since March 21st. We can clearly see that the mid-term uptrend is currently dominating the market.
Yesterday, on May 6, the price set the local high at 1,3951, which later turned in to a level of resistance. The closest level of support is located at 1,3868.
The market was moving within a sloping channel to form a «flag» - a price pattern. A break below 1,3905 will give way to 1,3868 and 1,3811. If the decline is suspended at the lower border of the range, the price may well rebound from it to resume the rally up to 1,3951. At the same time, a break above the new local high at 1,3951 will give way to 1,3958 and higher.
