- EUR/USD has been recovering amid temporary market calm.
- Expected strong US figures, stimulus progress and America's vaccine ramp-up set to boost the greenback.
- Wednesday's four-hour chart is showing that the currency pair faces tough resistance.
One step up, now two steps down? The relative calm has allowed the euro to lick its wounds and edge higher – but King Dollar is now set for a comeback, fueled by data and other factors.
US ten-year bond yields have stabilized around 1.40% after several days of turbulence that caught the eye of Federal Reserve Governor Lael Brainard. The world's most powerful central bank sees the increase in returns on US debt as a positive sign, it is just worried about volatility. Yet even without eye-catching moves, higher yields continue supporting the dollar.
Chicago Fed President Charles Evans speaks on Wednesday, and unless he offers action such as buying bonds, the dollar will likely remain bid. And there are good reasons. That contrasts the European Central Bank's alarm about higher bond yields.
Economists expect the ISM Services Purchasing Managers' Index to print 58.7 points in February – prolonged growth in America's largest sector. The Manufacturing PMI smashed estimates earlier in the week with 60.8.
Ahead of ISM's release, ADP's employment figures are forecast to show an increase of 177,000 private-sector jobs. While the correlation between the payroll firm's statistics and official data has been sketchy in the coronavirus era, the publication moves markets.
See:
- US ADP Employment Change February Preview: How soon will the small business sector bounce?
- US ISM Services PMI February Preview: Expect more than expected
EUR/USD may also reflect the gap in vaccination campaigns. While the old continent is struggling to get people to take the AstraZeneca jab, the US is ramping up the rollout and also production. Merck agreed to produce Johnson and Johnson's single-shot inoculations and President Joe Biden stated that every American could be offered a vaccine by the end of May.
Also in Washington, the Senate will begin debating Biden's $1.9 trillion covid relief package on Wednesday. While the president urged lawmakers to leave as much as possible unchanged, some elements such as the minimum wage hike will likely fall out of the legislation passed by the House. Nevertheless, advancing stimulus will likely add propping up the greenback.
On the other side of the pond, Germany is set to formally extend lockdown measures until the run-up to Easter, while Italy's Prime Minister Mario Draghi will reportedly slap new restrictions until after the early April holiday.
All in all, an upbeat market mood seems insufficient to push EUR/USD higher, with the dollar's advantage likely to show up in the price shortly.
EUR/USD Technical Analysis
Euro/dollar continues suffering from downside momentum on the four-hour chart and trades below the 50, 100 and 200 Simple Moving Averages – which are all converging around the 1.2110 level. That critical confluence is a make or break point for the pair.
Looking down,. support awaits at 1.2055, which separated ranges lately and also was a swing low in January. It is followed by 1.2020 and 1.1990.
Above 1.2110, the next line to watch is 1.2150, which held EUR/USD in mid-February, followed by 1.2180 1.2220.
Where next for the dollar as the Fed refocuses, bonds bring action, jobs set to cause jitters
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.