If in April-May, investors were fascinated by the accelerated vaccination against COVID-19 in the EU, then in June, the March story with the Fed's strength test risks repeating itself. In early spring, expectations of rapid US GDP growth in 2021 led to a sell-off of Treasury bonds, an increase in their yields, and a strengthening of the US dollar. Now the focus of the market is on factors that are much more significant for the Fed - unemployment and inflation.

Even though consumer prices in the eurozone reached 2% in May, the highest in the last three years, inflation in the United States is growing faster. The core CPI jumped to 3% in April. This level has not been seen since the 1990s. Will the Fed be able to continue its mantra about the temporary nature of the consumer price crackdown if the indicator accelerates to 4% in May? Based on forecasts of a 50% increase in used car prices, this could happen in May or June.

Dynamics of inflation and its components in the USA

Obviously, the Fed will not raise rates because of one or two sectors of the economy, but there is no need to buy bonds in the same volumes either. Jerome Powell has previously said that the Central Bank will prepare investors to say goodbye to QE in advance, and members of the FOMC are already beginning to do this, unanimously arguing about the need to start a dialogue on this topic. Most likely, the Fed chairman will report on the rollback of monetary stimulus in August in Jackson Hole, and the start of monetary policy normalization will be given in September. All this is logical and predictable, and the "bulls" on EUR/USD should not worry about this: the regulator is not going to leave the debt market, which will continue to limit the growth of Treasury bond yields and the US dollar.

The ECB's position is more confusing than its US counterparts. Some members of the Governing Council are confident that the recent increase in European debt rates is an objective process that reflects the recovery of the eurozone economy. Their opponents argue that rising bond yields will slow GDP's return to trend. The currency bloc is diversified in nature, and this fact increases the risks of a split within the ECB, which may be good news for the EUR/USD bulls.

It should be borne in mind that at the meeting on June 10, the European Central Bank will update its forecasts, many of which look outdated. In particular, unemployment in the eurozone fell to 8%, while its March estimate for the end of 2021 was 8.6%. The latest data on business activity and accelerated vaccination in the EU suggest an improvement in the GDP forecast, which will be a "bullish" signal for the euro. It should be noted that both the release of data on inflation in the United States and the announcement of the results of the ECB meeting are scheduled for one day, which is fraught with serious fluctuations in the quotes of the main currency pair.

Technically, the correction to the CD wave of the "Shark" pattern continues on the daily chart of EUR/USD as part of its 5-0 transformation. If the pair returns above 1.2135 or failed support tests at 1.205 or 1.198, traders will have the opportunity to form long positions with targets at 1.221 and 1.233.

EUR/USD, Daily chart