General analysis EURUSD for 10.05.2022

Current dynamics

Yesterday and today EUR/USD is trading in a downward correction. Prospects for the European economy are less and less predictable. The complicated geopolitical situation, refusal of the Russian energy carriers, and now the slowdown of the Chinese economic activity amid new outbreak of the coronavirus put significant pressure on the single European currency. At the same time investors increasingly pay attention to the signals of negative trends in the American economy.
The US stock market continues to fall. Falling shares of US companies usually helps to strengthen the dollar as a safe haven asset. At the same time such a prolonged decline amid uncertainties contributes to capital outflows from the USA, which undoubtedly has a negative impact on the US currency. The Fed is concentrating on fighting inflation and will not intervene in the stock market. It is still unclear how much monetary tightening the US regulator is planning. However, some Fed officials have spoken out against aggressive rate hikes, although most recently the Open Market Committee unanimously supported an acceleration of monetary tightening.
Meanwhile, the ECB made it clear that a cycle of monetary policy tightening would begin in the summer. Head of the European regulator blithely dismisses the scenario where economic activity stops growing and inflation continues to rise. We also need to keep an eye on the situation with the embargo on Russian hydrocarbons. At the moment a number of countries could count on more lenient terms for refusing oil from the Russian Federation. Dependence on Russian energy has led to Hungary, Slovakia and the Czech Republic receiving deferral privileges and Bulgaria is seeking the same. At the same time, leading European officials, together with their American allies continue to apply pressure on the eurozone countries, which leads to a weakening of the European economy and currency.
Several speeches by ECB officials are expected tomorrow morning. At 08:00 (GMT+2), Germany will publish consumer price index statistics. Similar data will be released in the US at 14:30 (GMT+2).

Support and resistance levels

On the 4-hour chart the instrument failed to consolidate above the Bollinger Bands moving average. The indicator is directed sideways and the price range has contracted, indicating that the current trend is about to change. MACD histogram is correcting in neutral area, no signal to open positions has been formed. Stochastic is also not giving a clear signal to enter the market.

• Support levels: 1.0420, 1.0460, 1.0505.
• Resistance levels: 1.0560, 1.0590, 1.0650, 1.0710.

Trading scenarios

• Short positions should be opened at the current price with a target of 1.0480 and a stop loss at 1.0595. Implementation period: 1-2 days.
• Long positions can be opened above the level of 1.0595 with a target of 1.0665 and a stop-loss at the level of 1.0550. Implementation period: 1-2 days.