EUR/USD Forecast: Euro set to rally after weathering two storms, showing its strength

 A currency pair that refuses to fall in face of adverse news is showing its strength. That is what has been happening to EUR/USD and it implies that a tad of positive developments could send it rallying.To get more news about WikiFX, you can visit wikifx.com official website.

　　The first downbeat development came from the European Central Bank, which decided to maintain an elevated pace of bond-buying. Some expected the Frankfurt-based institution to wind down its efforts to purchase assets at a rapid clip to support the recovery.
　　However, ECB President Christine Lagarde and insisted that it is premature to talk about an exit. Moreover, reports coming out of after the event suggested that only three out of 25 members supported some kind of a tapering down of the Pandemic Emergency Purchase Program (PEPP). The bank is set to print more euros for longer.
　　On the other side of the pond, the dollar failed to benefit from higher than expected inflation figures. The headline Consumer Price Index (CPI) hit the round 5% mark – a level that was last seen in 2008. Core CPI also exceeded estimates by 3.8%.
　　However, US Treasury yields extended their falls instead of rising. Investors seem convinced that the Federal Reserve will refrain from any hint of tapering down its current pace of bond-buying – $120 billion/month, seeing inflation as transitory. The outsized contribution of apparel, airfare and used cars to pushing prices higher indeed seems related to the rapid reopening rather than a structural change.
　　After holding up near 1.22, can EUR/USD extend its gains？ The economic calendar features the preliminary University of Michigan's Consumer Sentiment Index for June. A small increase is on the cards, and investors will also watch the inflation components. However, without a fresh surge, the dollar could suffer.Another factor is infrastructure news. According to reports, a bipartisan group suggested a $1.2 trillion expenditure plan, that could pave the path for providing the US economy another boost. Details are still lacking and so is a blessing from President Joe Biden, who is at the -7 meeting in London.
　　On the virus front, Europe continues catching up with the US on vaccinations, yet is still behind. Nevertheless, it is another minor bullish development.Euro/dollar has recaptured the 50 Simple Moving Average on the four-hour chart but remains capped by the 100 SMA. Momentum and the Relative Strength Index are flat.
　　Some resistance awaits at 1.22, which held it back early in the week, and then by 1.2220, the weekly high. The next levels to watch are 1.2250 and 1.2266.
　　Some support is at 1.2160, a cushion from this week and then by the weekly low of 1.2140. Critical support is at 1.21.