Volatility in EUR/USD Will Remain High

Technical analysis of Forex market

On Monday, May 24th, the major currency pair is consolidating at 1.2187. However, the fact that the previous week was pretty volatile suggests that the current week may be just the same.

Apart from the US 10-year bond yield, market players are currently focused on what is happening in the Euro Area. The European Central Bank Governor Christine Lagarde said earlier the chance that the regulator revised its current monetary policy was pretty small. She believes that it’s too early to discuss any long-term issues. Lagarde confirmed the ECB’s strategy to support favorable financing terms during the entire pandemic period and said that the time to wind up stimulus programs hadn’t come yet.

This was a response to the rumors that the aggressive vaccination campaign and the decline in the number of new coronavirus cases in Europe may trigger a quicker recovery of the European economy, hence lead to a sooner cancellation of the regulator’s stimulus programs.

In the H4 chart, EUR/USD is falling towards 1.2152 and may later start another growth to reach 1.2200, thus forming a new consolidation range between these two levels. If later the price breaks this range to the downside, the market may correct towards 1.2000; if to the upside – expand it up to 1.2300. From the technical point of view, this scenario is confirmed by MACD Oscillator: its signal line is falling towards 0. Moreover, a divergence implies a breakout of this level to the downside and may lead to a further correction in the price chart.

As we can see in the H1 chart, after rebounding from 1.2238, EUR/USD has completed the descending structure to reach the downside border of the range at 1.2160; right now, it is correcting towards 1.2200. After that, the instrument may start another decline with the target at 1.2152. From the technical point of view, this scenario is confirmed by the Stochastic Oscillator: after breaking 50 to the upside, its signal line may grow towards 80. Later, the line may rebound and resume falling to reach 20.