EURUSD may manage to reach 1.06 level this time

The EURUSD currency pair continues to actively test the level of 1.05. The bulls have not yet managed to consolidate above this mark, but the day before yesterday’s renewal of the monthly high increases their chances to overcome this obstacle sooner or later. A confirmed breakdown of the level of 1.05 may trigger a massive closing of short positions on the euro, and quotes will have a chance to quickly reach 1.06 and the highs of December.

Buyers of the European currency perked up after the parliamentary elections in Germany. The election results were generally in line with forecasts, and analysts are now waiting for the new authorities to carry out active reforms to bring the German economy out of more than two years of stagnation. Due to these factors, ECB board member Isabel Schnabel suggests considering the possibility of a pause in the monetary policy easing cycle. According to her, lowering interest rates at current levels will have little effect.

Market participants were unpleasantly surprised by yesterday’s data in the US. The Conference Board Consumer Confidence Index dropped sharply from 105.3 to 98.3 with expectations of 102.7. The figure reached its lowest level since June, and the scale of its decline in February was the largest in 4 years. It is still unclear whether this dynamics will lead to a significant slowdown in GDP growth. However, in any case, this is a wake-up call for dollar buyers.

According to a Reuters poll, many institutional investors are revising down their forecasts for the return on dollar assets. Peter Tchir of Academy Securities has cut his target on 10-year Treasury yields for this year from 4.8% to 4.6%. In his opinion, the Fed may be forced to cut rates more aggressively amid mass layoffs of government workers and a subsequent decline in consumer spending.

The target of EURUSD buyers after 1.05 will be the 1.06 level. This scenario will remain valid as long as the quotes remain above 1.042.

Consider the following trading strategy:

Buy EURUSD near the level of 1.05. Take profit – 1.06. Stop loss – 1.042.