EUR/USD Forecast: Bears take over on tapering speculation
EUR/USD Current Price: 1.2165
- The US Federal Reserve announced it would start unwinding part of its programs.
- US employment-related data largely surpassed the market’s estimates, fueling dollar’s demand.
- EUR/USD pressuring daily lows and at risk of falling further.
The EUR/USD pair held on to familiar levels a handful of pips below the 1.2200 figure through the first half of the day, retreating from a daily high at 1.2215 achieved during Asian trading hours. The main theme for the day is the US Federal Reserve, as the central bank announced on Wednesday that it will begin winding down part of its multiple programs set to support the economy throughout the pandemic.
"Portfolio sales will be gradual and orderly, and will aim to minimize the potential for any adverse impact on market functioning," the Fed said. However, stocks traders take it badly, as European indexes are firmly down, dragging US futures alongside.
Markit published the final readings of its May Services PMIs, confirming the German index at 52.8 and revising that of the EU to 57.1. EUR/USD accelerated its slump after the release of US employment-related data. The ADP survey on private jobs creation posted a whopping 978K in May, largely surpassing the 650K expected. Initial Jobless Claims for the week ended May 28 printed at 385K, better than the 395K expected and the lowest reading since the pandemic started.
On a down note, job cuts announced by US-based employers rose 7% in May to 24,586 from the 22,913 announced in April, according to the Challenger Job Cuts report. The country has yet to release the May ISM Services PMI, foreseen at 63 from 62.7 in the previous month. In this scenario, stocks are further down and the dollar up, as signs of economic growth put more pressure on the Fed to tighten its monetary policy.
EUR/USD short-term technical outlook
The EUR/USD pair fell to a fresh weekly low of 1.2158, holding nearby ahead of Wall Street’s opening. The 4-hour chart shows that after meeting sellers around its 20 SMA, the pair accelerated below the 100 SMA, indicating resurgent selling interest. Technical indicators head firmly south within negative levels, reaffirming the bearish case. The pair has room to extend its slide sub-1.2100 should the current sentiment persists.
Support levels: 1.2160 1.2120 1.2070
Resistance levels: 1.2200 1.2245 1.2280
Author
Valeria Bednarik
FXStreet
Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.
