EURUSD extends above May high in trading today

The EURUSD has moved sharply higher today helped by ECBs Lagarde comments of a possible move to positive rates by the end of the 3Q. The current rate is -0.50%. Headline inflation is at 7.4%. The markets are pricing in 100 basis point increase by the end of the year.

Other ECB officials have expressed the need for rates moving higher including Knot, and Kazaks. ECB's Villeroy said that the "inflation fight means normalizing interest rates". ECBs Rehn said it was "necessary for rates to move relatively quickly out of negative territory". The comments from Lagarde are the most hawkish she has made to date.

The EURUSD moved above the May 5 high on the news and also the 50% retracement of the last trend move down from the April 21 high. Both those levels came near 1.0642. The current price is trading at 1.0653 after reaching a peak of 1.06865. Traders will be eyeing the 1.0633 to 1.0642 area as close support/risk now. Stay above and the price can continue to probe to the upside.

Recall, the price remained in a range between 1.04709 and 1.0641 between April 27 and May 12 (see red box in the chart above). The price extended to the downside on May 12, reaching a low for the year at 1.03485 on May 13.

However, since then, the price has stepped higher moving above the 100 and 200 hour moving average last Thursday and staying above those moving averages since that time.

The extension above the higher extreme from the April 27 to May 12 range is a break, that should now hold support if the buyers are serious about the move.

Taking a broader look at the daily chart, the 1.07265 level was a swing low going back to April 2020. That level will now be a upside target on further upside momentum.

Earlier today, the price broke above the March 2020 low of 1.06374. That level is in between the swing level off the hourly chart increasing the areas importance going forward.

As evident from the trend move down since May/June 2021, there is room to roam on the upside on further upside momentum.

The EURUSDs decline has been helped by the disparity between interest rate policy in the US vs the EU.

The Federal Reserve Federal Reserve The Federal Reserve System, more commonly known as the Fed, represents the central banking system of the United States. Like other central banks globally, the Fed is responsible for monetary policy, in this case in the US.The Fed is one of the most watched and followed entities for forex traders, given its material impact on the US dollar. Founded initially in 1913, the Fed was created to perform a wide range of functions. This includes stabilizing and maintaining flexible monetary policy in the The Federal Reserve System, more commonly known as the Fed, represents the central banking system of the United States. Like other central banks globally, the Fed is responsible for monetary policy, in this case in the US.The Fed is one of the most watched and followed entities for forex traders, given its material impact on the US dollar. Founded initially in 1913, the Fed was created to perform a wide range of functions. This includes stabilizing and maintaining flexible monetary policy in the Read this Term has been tightening monetary conditions for a number of meetings now in an attempt to get rates back to neutral and cut off inflation Inflation Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Read this Term.

The ECB has remained unchanged as result of risks from the war in Ukraine.

With inflation moving higher and fear of inflation expectation becoming more entrenched that interest rate divergence is breaking down, helping to give the EURUSD a boost as a result. There is room to roam simply on the back of similar interest rate policy going forward.

Nevertheless, following the technicals is still required as the story and sentiment can change.