EUR/USD Forecast: Time to tumble? Three signs Fed is tiptoeing toward tapering
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UPGRADE- EUR/USD has been edging lower amid signs the Fed is inching toward buying fewer bonds.
- Two top-tier US indicators are set to move markets as well.
- Thursday's four-hour chart is painting a mixed picture.
Time to "think about thinking about tapering" – Philadelphia Fed President Patrick Harker has paraphrased Chair Jerome Powell's previous comments on refraining from a rate hike. Up to these comments, Robert Kaplan of the Dallas Fed was the lone voice calling for a discussion about reducing the bank's current scheme of printing $120 billion per month.
Harker's comments serve as the first hint that the bank is moving toward tightening, supporting the dollar.
The second hint comes from the Fed's actions rather than words – it announced that pandemic-era corporate bond and ETF program will wind down. The total of both portfolios is a minuscule $13.6 billion, less than what the Fed buys in a week under its broader bond-buying scheme. Nevertheless, this baby step serves as another hint toward a larger move.
Third, the Federal Reserve's Beige Book pointed to growing price pressures. This document includes anecdotal evidence from the bank's contact across the country and is published toward its all-important rate decision. If the Fed has this new information on its desk, perhaps it could signal fewer bond buys in two weeks.
US inflation? Only if the Fed says so, why every dollar rise could be a selling opportunity
These three moves came after several data points such as the ISM Manufacturing Purchasing Managers' Index for May showed elevated prices. On Thursday, the main event is the ISM Services PMI. Apart from pointing to robust economic activity, will it also scream "inflation is rising?" The indicator serves as a hint toward Friday's Nonfarm Payrolls, but inflation is in focus now.
US ISM Services PMI May Preview: The employment puzzle
Earlier, the greenback is set to rock in response to ADP's private-sector jobs report. While the correlation between this figure and the official NFP has been weak during the pandemic, it remains of importance.
US ADP Private Payrolls May Preview: Is something amiss in the labor market?
In the old continent, Markit's final Services PMIs for May will likely confirm robust growth. Europe's accelerating vaccination campaign supported the euro, but now seems to be priced in.
All in all, there are reasons to see the currency pair extending its falls.
EUR/USD Technical Analysis
Euro/dollar has slipped below the 50 Simple Moving Average on the four-hour chart and momentum has flipped back to the downside. It is now leaning on the 100 SMA and seems to be on the verge of breaking lower.
Support awaits at 1.2175, a cushion from earlier this week, followed by 1.2160 and 1.2130. Further down, 1.2075 and 1.2055 are eyed.
Resistance is at 1.2220, which capped a recovery attempt. It is followed by 1.2255, the weekly high, and then by 1.2266, May's peak.
- EUR/USD has been edging lower amid signs the Fed is inching toward buying fewer bonds.
- Two top-tier US indicators are set to move markets as well.
- Thursday's four-hour chart is painting a mixed picture.
Time to "think about thinking about tapering" – Philadelphia Fed President Patrick Harker has paraphrased Chair Jerome Powell's previous comments on refraining from a rate hike. Up to these comments, Robert Kaplan of the Dallas Fed was the lone voice calling for a discussion about reducing the bank's current scheme of printing $120 billion per month.
Harker's comments serve as the first hint that the bank is moving toward tightening, supporting the dollar.
The second hint comes from the Fed's actions rather than words – it announced that pandemic-era corporate bond and ETF program will wind down. The total of both portfolios is a minuscule $13.6 billion, less than what the Fed buys in a week under its broader bond-buying scheme. Nevertheless, this baby step serves as another hint toward a larger move.
Third, the Federal Reserve's Beige Book pointed to growing price pressures. This document includes anecdotal evidence from the bank's contact across the country and is published toward its all-important rate decision. If the Fed has this new information on its desk, perhaps it could signal fewer bond buys in two weeks.
US inflation? Only if the Fed says so, why every dollar rise could be a selling opportunity
These three moves came after several data points such as the ISM Manufacturing Purchasing Managers' Index for May showed elevated prices. On Thursday, the main event is the ISM Services PMI. Apart from pointing to robust economic activity, will it also scream "inflation is rising?" The indicator serves as a hint toward Friday's Nonfarm Payrolls, but inflation is in focus now.
US ISM Services PMI May Preview: The employment puzzle
Earlier, the greenback is set to rock in response to ADP's private-sector jobs report. While the correlation between this figure and the official NFP has been weak during the pandemic, it remains of importance.
US ADP Private Payrolls May Preview: Is something amiss in the labor market?
In the old continent, Markit's final Services PMIs for May will likely confirm robust growth. Europe's accelerating vaccination campaign supported the euro, but now seems to be priced in.
All in all, there are reasons to see the currency pair extending its falls.
EUR/USD Technical Analysis
Euro/dollar has slipped below the 50 Simple Moving Average on the four-hour chart and momentum has flipped back to the downside. It is now leaning on the 100 SMA and seems to be on the verge of breaking lower.
Support awaits at 1.2175, a cushion from earlier this week, followed by 1.2160 and 1.2130. Further down, 1.2075 and 1.2055 are eyed.
Resistance is at 1.2220, which capped a recovery attempt. It is followed by 1.2255, the weekly high, and then by 1.2266, May's peak.
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