EUR/USD Forecast: One step down, two steps up? Why the dollar is set to extend its falls
|- EUR/USD has been retreating from the highs as investors await Fed Chair Powell's speech on Friday.
- An update on US GDP and covid headlines are set to shake the dollar.
- Thursday's four-hour chart is pointing to further gains for the currency pair.
Ongoing growth with more support from the central bank – markets seem to be content with the impact of the Delta COVID-19 variant on the economy and policymakers. For the dollar, it means additional falls. However, as this balance is a difficult act – and Europe has its own issues – the road to further EUR/USD gains is bumpy.
One such road bump came from Wednesday's release of Durable Goods Orders figures for July. Headline orders rose by 0.7% last month, better than estimated, giving the greenback a jolt to the upside. It also provided a profit-taking opportunity for those shorting the dollar.
US Durable Goods Orders: Consumers, business hold steady in July
However, the broader trend is of expectations that Federal Reserve Chair Jerome Powell would refrain from hinting at tapering down the bank's bond-buying scheme. His speech on Friday, at the Jackson Hole Symposium, will be held virtually – a sign that the Fed is wary of the virus and its economic impact.
If the Fed scales down its own activity, the broader US economy is still struggling and needs more dollars printed. That is pushing the greenback down.
How to trade the Jackson Hole meeting
On the other hand, while the Delta variant is devastating hospitals in some southern states – with Florida standing out – there are signs of moderation. The 14-day change has slowed to 23% from triple-digit increases earlier this month. That implies the world's largest economy is still set to continue growing at a satisfactory pace. In turn, demand for the dollar as a safe haven is easing.
An update on how the economy did in the second quarter is due out later on Thursday, and the economic calendar is pointing to an upgrade from 6.5% to 6.7% annualized expansion. That would serve as a reminder of America's rapid recovery.
On the other side of the pond, the European Central Bank releases meeting minutes from its July meeting and it could shed light on the thinking in Frankfurt. On Wednesday, ECB Vice-President Luis de Guindos said that the bank could upgrade its economic forecasts. That helped the euro move higher.
On the other hand, German consumer and business climate figures both missed estimates, reflecting concerns about the recovery.
Overall, the trend is to the upside, but not a one-way street.
EUR/USD Technical Analysis
Euro/dollar has surpassed the 100 Simple Moving Average on the four-hour chart and benefits from upside momentum while trading below the 200 SMA. Overall, bulls are in the lead but do not have full control.
Resistance awaits the daily high of 1.1775, followed by 1.1805, last week's peak. Further above, 1.1825 and 1.1860 await EUR/USD.
Support is at 1.1750, which capped the currency pair early this week, and then by 1.1725, which provided support in recent days. Further down, 1.1695 and 1.1660 are eyed.
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