EUR/USD has fundamentals and technicals reasons to fall

EUR/USD has been succumbing to data-fueled dollar strength. Down in March, up in April and now back down in May? The beginning of last month marked the bottom for EUR/USD and the "sell in May and go away" adage could come into play now as fundamentals and technicals point to further losses, according to FXStreet’s Analyst Yohay Elam.

The ISM Manufacturing PMI, concerns about Europe's economy and hawkish Fed comments should keep EUR/USD pressured

“The economic gap is widening, and it could weigh heavily on the euro/dollar. America grew at an annualized rate of 6.4% in the first three months of 2021, roughly equivalent to a quarterly rate of 1.6%. At the same time, eurozone output shrank by 0.6%. Moreover, components of the US expansion point to an even quicker growth in the second one.”

“Several European countries are enjoying a bank holiday on Monday, but the American session could see higher trading volume and perhaps another jolt higher to the dollar. The ISM Manufacturing PMI is set to rise beyond March's 64.7 score. The publication serves as a hint toward Friday's Nonfarm Payrolls.” 

“Robert Kaplan, the President of the Dallas Fed wants the bank to signal to the taper of the Fed's bond-buying scheme ‘soon.’ Powell is set to speak later in the day. Will he begin leaning toward a more hawkish view?”

“Momentum on the four-hour chart has turned to the downside and the currency pair dipped below the 100 Simple Moving Average in addition to slipping below the 50 SMA earlier on. The Relative Strength Index (RSI) also sheds ground, but it is holding above 30 – thus outside oversold conditions.” 

“Critical support is at 1.1990, just below the psychological barrier of 1.20. That was a clear separator of ranges last month. Some resistance is at 1.2050, a support line from last week, and then by 1.2080 and 1.2117, both swing highs on the way up.”