As European traders head for the exits for the day, and close out the month of May, the EURUSD is ending the month with a gain.
The month increase is only the 5th monthly advance over the last 17 trading months. Over that time (starting in January 2020), the EURUSD has moved from a high of 1.23488, to the low reached on May 13 this month at 1.03485. That move is 2000 pips or a -16.19% decline.
The catalyst for the declines in 2022 has been driven by diverging monetary policy with the Fed launching the tightening cycle, while the ECB will not start their tightening cycle until July.
However, with the ECBs decision to launch in July (most likely but you never know), the focus has returned to buying the EURUSD this month.
Also helping the upward bias is a technical bounce. Looking at the monthly chart above, the low price from the 1st week of 2017 bottomed at 1.0339. The low price in May this year bottomed at 1.03485.
The price got within 9 pips or so of the 5+ year trading range. The inability to push below that low gave the dip buyers something to lean against where traders could define, limit, and accept risk. The correction was helped by that technical double bottom.
What next?
Looking at the weekly chart below, the price rise off of the low this month has moved into a swing area between 1.0757 and 1.0804. A move above would increase the bullish bias in the new trading month. The next upside targets would come between 1.0878 and 1.09248, followed by the 38.2% retracement of the move down from the January 2021 high. That level comes in at 1.1112.
Conversely, should there be a dip, traders will watch the 2020 low for the year at 1.06347 for support. During the week of April 24, 2022, the price moved and trended lower away from that low. The following week, the high price stalled against that level before moving back to the downside.
Last week, the price moved back above that old low.
Going forward, stay above 1.06347 would give the buyers some added hope that a low is in place and further probing to the upside would be warranted. Move below and all bets are off for any continuation to the upside for the EURUSD.
