EUR/USD Forecast: Bears attacking critical support, Nonfarm Payrolls trigger a bounce

EUR/USD has been on the back foot as US bond yields are rising.
Weak Nonfarm Payrolls may weigh on the dollar, while vaccine news may trigger higher volatility.
Friday's four-hour chart is showing that bears are gaining ground.

Yohay Elam FXStreet

Is King Dollar reclaiming its throne? The greenback has been extending its comeback, buoyed by rising bond yields. Democrats' win in Georgia gives President-elect Joe Biden's party control of the Senate – and a path to vast expenditure.

The new administration may opt for a stimulus package worth as much as $3 trillion, including considerable infrastructure spending on top of pandemic-relief measures. Prospects of more government debt push investors away from Treasuries, with the ten-year yield floating around 1.1%. In turn, that makes the dollar more attractive.

Five factors moving the US dollar in 2021 and not necessarily to the downside

Markets are looking to the medium term and continue shrugging off the historic raid of the Capitol by President Donald Trump supporters. In the short term, cabinet resignations and growing Democratic calls for his impeachment are dramatic, but an early departure – with only 12 days to go – makes little difference to Wall Street.

The focus shifts to the King of economic indicators – US Nonfarm Payrolls. The economic calendar is pointing to an increase of fewer than 100,000 jobs in December, a considerable slowdown, and a result of the winter wave of the virus. Leading indicators toward the event were mixed. One worrying statistic was ADP's private-sector labor report, which showed a loss of 123,000 jobs.

If the official figures also show a squeeze in hiring, the dollar could drop on expectations of more stimulus from the central bank. Jerome Powell, Chairman of the Federal Reserve, speaks next week and may provide hints toward the upcoming Fed meeting later this month.

See:

Do vaccines work against the new variants? Pfizer said that the solution is developed with BioNTech is efficient against the more sophisticated South African strain, cheering investors. On the other hand, British scientists and also politicians cast doubts about it – and more data is needed. Ursula von der Leyen, President of the European Commission, announced the EU secured more doses of the vaccine.

In the meantime, Germany reported a record daily death toll, and hospitals across the continent continue struggling. Admissions are above 130,000 in the US and mortalities surpassed the grim mark of 4,000 on Thursday.

Overall, the battle between the vaccine and the virus continues, and so does the fight over US yields – which is critical for the dollar and the next moves in euro/dolar.

EUR/USD Technical Analysis

Momentum on the four-hour chart has flipped downward while EUR/USD is still battling teh 100 Simple Moving Average. It is trading below the 50 SMA but above the 200 one.

All in all, bears are gaining ground but are far from full control.

Critical support awaits at 1.2205, which is closing level on the last day of 2020. A breach of that level opens the door to 1.2175, 1.2150, and 1.2150, all stepping stones on the way up last month.

Resistance is at 1.2275, which capped the pair in mid-December, followed by 1.2310, a former double top, and then by 1.2350 – 2021 high.

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

GBP/USD flirts with weekly highs in the Fed's aftermath

GBP/USD reversed early losses following the Federal Reserve decision to keep rates on hold and neared the 1.3360 level before shedding some ground. Focus shifts to Governor Kevin Warsh's speech, while the Bank of England will announce its monetary policy decision on Thursday.

EUR/USD extends rally pass 1.1450 on Fed's Warsh

EUR/USD trades at fresh weekly highs above 1.1450, following the Federal Reserve monetary policy decision to keep interest rates on hold. The statement showed policymakers remain confident in economic progress while blaming inflation on energy prices. The divided vote among officials put in doubt a September hike, leading to sharp US Dollar losses.

Gold hovers around $4,100 as Fed decision hits the USD

Gold surged following the Federal Reserve's decision to keep the benchmark interest rate unchanged at 3.50%-3.75%. Policymakers noted that inflation remains elevated and that economic activity is expanding at a solid pace despite elevated uncertainty, spurring doubts about a rate hike in September. XAU/USD peaked above $4,100, now battling to retain the level.

No soft target: Warsh vows to return inflation to 2%

The Fed left interest rates unchanged at 3.50%-3.75%, but the decision carried a distinctly hawkish edge as three officials voted for an immediate 25-basis-point increase. Chair Kevin Warsh reinforced that message, insisting there was no tolerance for a softer inflation target and warning that the Fed would not hesitate to act.

How the CLARITY Act unlocks Wall Street’s tokenization pipeline

The United States (US) Digital Asset Market Clarity Act (CLARITY Act), awaiting a full Senate floor vote, promises to unlock Wall Street’s potential to tokenize financial assets, including equities, US Treasuries, private credit, real estate and commodities at a scale that could supercharge the real-world asset (RWA) market from the current $17 billion level to $5.5 trillion by 2030, according to

US Dollar mid-year outlook: Exceptional currency, exceptional risks?

The US Dollar enters the second half of 2026 in a markedly different position from a year ago. The King currency has recovered, reflecting persistent US inflation, changing expectations for Fed policy, geopolitical tensions and renewed demand for defensive assets.