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EUR/USD has been edging higher as the US dollar drops with yields. However, worries about China’s cooldown and Europe’s covid concerns may limit the next moves, Yohay Elam, an Analyst at FXStreet, reports.

EUR/USD is settling above 1.18

“Europe’s largest countries remain under significant measures to curb the spread of COVID-19, weighing on their economies. The vaccination campaign is set to pick up in the second quarter, which begins in earnest only on Tuesday, and that provides hope. However, promises to ramp up inoculations have been broken in the past.”  

“If the US is growing quickly, it is set to carry the rest of the world forward and investors may seek riskier assets. However, this risk-on/risk-off dynamic is supporting the dollar amid reports that China wants to curb credit.”

“While conservative Democratic Senator Joe Manchin opposes a corporate tax hike to 28%, he supports a raise from 21% to 25% and seems to agree to other parts of the program. Moreover, Dems will be able to use the short-cut reconciliation process to pass the bill, once they agree within themselves on the details. If infrastructure investment advances, it could remind markets of the potential for higher inflation, sending the dollar up once again.”

“Some resistance awaits at the daily high of 1.1820, followed by 1.1875, which provided support in March.”

“Support is at 1.1785, a resistance line from last week, followed by 1.1760 and 1.1740.”