EUR/USD: Euro clings to Powell to avoid further falls
|EUR/USD has breached the 1.2125 triple bottom in a move driven solely by the dollar. According to FXStreet’s Analyst Yohay Elam, there are reasons to see further falls, yet Powell has the power to change the pair's course.
Key quotes
“The greenback has been gaining ground alongside rising US bond yields. President-elect Joe Biden is expected to unveil a stimulus plan worth around $2 trillion – more than originally expected. In expectation of more debt issuance – and more robust economic growth – investors rotated from bonds to stocks. The resulting increase in yields made the dollar more attractive.”
“Jerome Powell, Chairman of the Federal Reserve, speaks later in the day and may provide hints if he prepares to increase the bank's bond-buying scheme. However, speculation is mounting that the Fed could reduce it as economic expansion allows for higher long-term interest rates. His words are set to determine the next moves in the dollar.”
“US jobless claims figures badly disappointed with a rise to 965,000 compared with fewer than 800,000 projected – yet the news failed to halt the dollar's advance.”
“The German economy has likely contracted by around 5% in 2020 according to initial estimates and Italy's government is suffering a political crisis. These developments only add to the euro's suffering.”
“The next cushion is close – the round 1.21 level provided support in early December. Further down, 1.2060 was a swing low, and it is closely followed by 1.2045, a stepping stone on the way up. Above 1.2125, the next level to watch is 1.2170, the daily high. It is followed by 1.2222, the weekly peak.”
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