18.05.202115:31 Forex Analysis & Reviews: Forecast for EURUSD and GBPUSD: the euro and the pound are waiting for good times.

The US dollar continued to lose ground on Tuesday's trading, as dovish statements from the US Federal Reserve representatives increased hopes that the Central Bank will keep interest rates low for quite a long time, despite inflationary pressures, which we became aware of last week. Traders' focus will be on the Fed minutes, which are due to be released on Wednesday. Investors will try to get more detailed answers about the views of politicians on price pressure and consider any hints about when the regulator may begin to reduce the quantitative easing program.

Let me remind you that yesterday Richard Clarida said that a weaker-than-expected US employment report confirmed his concerns that the economy has not yet reached the threshold that justifies a reduction in large-scale bond purchases by the Central Bank. "After the release of the April employment report, it is clear that we have not made significant progress in the recovery of the labor market," Clarida said on Monday, referring to the Central Bank's recommendations on when it will begin to reduce bond purchases. He also noted that politicians would weigh the data during this year, and we will announce plans to curtail the volume of bond purchases before making such a decision.

Today, in the first half of the day, investors closely watched the data on the GDP of the eurozone, which showed a double recession in the 1st quarter of this year. But, as we can see, this did not surprise anyone since everyone understands why this happened and what measures were then taken. Traders are now betting more on outperforming data on vaccination rates and the opening of European economies than relying on past statistics, which were one yesterday and another today. It is what happened with today's GDP data. The eurozone economy went back into recession in the first quarter of this year, as originally expected. It was directly related to the restrictions due to the COVID-19 pandemic. EU data from Eurostat for Europe: Gross domestic product shrank by 0.6% compared to the fourth quarter, when GDP fell by 0.7%, which fully coincided with the preliminary estimate published on April 30. Let me remind you that after record growth in the third quarter of 2020, GDP fell for the second time in a row, returning the economy to a state of a technical recession. On an annualized basis, GDP fell 1.8% after a significant 4.9% decline in the fourth quarter of 2020. The annual figure was also in line with economists' forecasts.

It makes no sense to think further on this topic and cite some fundamental indicators that led to such a fall since it is clear why this happened. What is currently happening in the eurozone economy allows us to look forward to the future with optimism, completely forgetting these statistics.

Another report from Eurostat today revealed data on the trade surplus, which fell sharply in March this year due to falling exports and rising imports. The trade surplus fell to 13 billion euros in March from 23.1 billion euros in February. Exports fell 0.3%, while imports jumped 5.6%. It suggests that the demand of companies for foreign goods and raw materials has grown significantly against the background of the opening of the eurozone economy, which in the future can only worsen this indicator.

As for the technical picture of the EURUSD pair, the bulls were getting to a fairly important resistance at the base of the 22nd figure, for which the fight will unfold in the second half of the day. Fixing above this range will open a direct road to the highs of 1.2250 and 1.2290, which will only strengthen investors' confidence in the right decision to bet on the growth of risky assets in the early summer of this year. Suppose we observe a downward correction of the pair today during the US session. In that case, the bulls will show activity after the euro falls to the support area of 1.2180, and the next significant level is slightly lower - in the area of 1.2140.

GBP

The British pound has strengthened its position against the US dollar. It is ready to continue growing after a small downward correction, which may occur from the current local highs at which the pair is currently trading. From a technical point of view, the return of the bulls to control the resistance at the base of the 42nd figure will allow the major players to increase their positions, which will throw the trading instrument already in the area of the highs of 1.4260 and 1.4300. Suppose the pressure on the pound returns in the second half of the day, and this option is possible only in the case of very good data on the US economy. In that case, buyers will show activity after updating the support at 1.4140.

What contributed to such a significant increase in the pound in the first half of the day? The reason is simple - the good performance of the labor market, which continues to recover after the coronavirus pandemic, is a "green light" for investors who expect the continuation of the medium-term upward trend in the pound. Today's report from the Office for National Statistics (ONS) shows that the unemployment rate in the UK fell in March this year by 0.3% to 4.8%. It is below the forecast of economists, who expected unemployment in the region of 4.9%. The overall employment rate is estimated at 75.2%, which is 0.2% higher than in the previous month. It is noteworthy that in March, the number of applications for unemployment benefits fell by 15,100, although economists had expected an increase of 25,000. Annual growth in average wages, including bonuses, was 4.0% but was below forecasts of 4.5%. Average earnings increased by 4.6% per year.

All this, together with the recent UK GDP report, provides a clear indication of how investors will assess the prospects for the growth of the British pound in the near future. We can safely rely on the continued strengthening of the pair in the medium term.

And at the end of the article, I would like to say a few words that the UK plans to approve the Johnson & Johnson vaccine. According to a statement from the UK medicines regulatory authority, many cities will soon receive the company's vaccine, which will help speed up vaccination among the population. Speaking of the vaccine, US President Joe Biden yesterday promised to send another 20 million doses abroad. It is expected to happen in June of this year, as supply begins to exceed demand.