General analysis EURUSD for 08.04.2022

Current dynamics

The EUR/USD pair is correcting near the May 2020 low on Friday. The dollar continues to receive support amid the high probability of a sharp tightening of monetary policy. In addition to the expected 50 basis point rate hike in May, the regulator is set to start cutting the central bank balance sheet immediately after the May meeting. It is expected that the volume of reduction will be unprecedented ($95bn monthly), however, it should be noted that the current inflation rate is more than 3 times the target of 2%, so such aggressive actions are acceptable. On Wednesday the minutes of the Fed's March meeting were released, from which it became clear that the majority of the Open Market Committee members were prepared to raise the key rate by 50 basis points, but were cautious due to the uncertainty in Ukraine. Also worth noting is the rise in Treasury yields, which contributes to an all-around strengthening of the US currency.
It is obvious that the Fed will tighten monetary policy much faster than the ECB. The European regulator is in a very difficult position. The minutes of the ECB's March meeting have been published but it is still not clear whether the central bank will start to withdraw its monetary stimulus. Officials are generally keen to roll back stimulus but the risk of recession is very high and therefore it is very likely that the ECB will take another pause. It should not be forgotten that the EU is looking for ways to reject Russian energy and should completely abandon Russian coal as early as the end of May. Also, eurozone countries intend to release strategic oil reserves to stabilize prices, creating more and more risks in the region's economy.
Another factor affecting the value of EUR is the unpredictability of French elections. The gap between incumbent President Macron and far-right Marine Le Pen is narrowing. It looks like there will have to be a run-off which will take place on April 24. Le Pen's position is very different from the current policy of the French government, so traders will be keeping a close eye on the electoral process, which starts next Sunday.

Support and resistance levels

On the 4-hour chart, the instrument is trading in the lower Bollinger Band range. The nearest significant support is the indicator's lower boundary. The indicator is pointing downwards and the price range is not significantly shortened, indicating a continued downtrend correction. The MACD histogram is in the negative zone, holding a strong sell signal. Stochastic is preparing to leave the oversold area, a strong buy signal could be formed in the first half of next week.

• Support levels: 1.0720, 1.0770, 1.0805, 1.0835.
• Resistance levels: 1.0900, 1.0960, 1.1015, 1.1060, 1.1105, 1.1155.

Trading scenarios

• Short positions should be opened at the current price with a target of 1.0765 and a stop loss at 1.0925. Implementation period: 1-3 days.
• Long positions can be opened above the level of 1.0925 with a target of 1.1010 and a stop-loss at 1.0890. Implementation period: 1-3 days.