EURUSD Defends 1.05 For Now
10 May 2022
The EURUSD pair traded relatively flat on Tuesday, hovering near 1.0550 ahead of the US session
It looks like bears have no more strength to push the price below the essential 1.05 support.
Global situation poses risks
As coronavirus-related limitations in China continue to impact global trade volume, market participants are growing increasingly anxious about a worldwide economic downturn. Despite a drop in the number of cases in Shanghai, officials are said to have tightened restrictions as the government intends to enforce its "zero-COVID policy."
Furthermore, persisting supply-chain difficulties are predicted to keep global inflation rising for longer than anticipated. Meanwhile, there are no signs of the Russia-Ukraine conflict de-escalating.
EU data exceeded expectations
Despite approaching recession fears, the German ZEW headline survey for May indicated that the Economic Sentiment Index improved, coming in at -34.3 from -41.0 before, exceeding predictions of -42.0 by a considerable margin.
Additionally, the Eurozone ZEW Economic Sentiment Index was -29.5, up from -43.0 the previous month and -41.0 anticipated.
"Compared to the previous month, the outlook is less pessimistic about Germany's economic situation. Moreover, A large majority of the experts assume an increase in short-term interest rates by the ECB in the next six months," the survey said
Overall, the EURUSD pair seems heavily oversold, likely prompting a short-squeeze relief rally. The short-term resistance is found near 1.0630, and should the euro rally above that level; we might see further upside pressure, targeting 1.0760.
On the other hand, if EURUSD drops below 1.05, further decline would likely be inevitable, with a possible drop toward 1.03 in the initial reaction.