EUR/USD Forecast: Dollar set to continue rallying on yields, stimulus news
EUR/USD Current Price: 1.1916
- US employment data surprised on the upside, as the country added 379K jobs in February.
- The US Senate passed the American Rescue Plan Act with some changes to the House’s bill.
- EUR/USD is trading near a critical mid-term support level and poised to break it.
The EUR/USD pair fell to 1.1892 on Friday, a fresh 2021 low, as an already strong American dollar got a boost from a surprise on the US employment side. The country published the Nonfarm Payroll report, which added 379K new jobs in February, much better than anticipated. The unemployment rate contracted to 6.2%, better than the 6.3% expected. The encouraging news also underpinned equities, while US Treasury yields reached fresh YTD peaks. The greenback maintained its strength heading into the weekly close, settling just above the 1.1900 threshold.
On Saturday, the US Senate passed the $1.9 trillion stimulus package, although some changes were introduced regarding the increase of the minimum wage to $15 per hour and the number of people who will qualify for a $1,400 stimulus payment. The final vote was 50-49, with all Democrats voting in favor of the bill and all Republicans voting against it. The bill, called American Rescue Plan Act, now moved back to the House, where it will be voted on Tuesday.
A stimulus injection usually boosts equities to the detriment of the greenback. However, the dollar may retain its strength on Monday, as the stimulus package has been mostly priced-in, while expectations of higher inflation will likely maintain government debt yields up. The US won’t publish macroeconomic data on Monday, while the EU will release the March Sentix Investor Confidence Index, foreseen at 1 from -0.2 in the previous month.
EUR/USD short-term technical outlook
The EUR/USD pair neared the 61.8% retracement of the November/January rally at 1.1885, the immediate support. In the daily chart, the pair is poised to extend its decline, as indicators maintain their downward slopes near oversold readings. The pair has failed to recover beyond a directionless 20 SMA and broke below its 100 SMA, now trading well below them. In the 4-hour chart, the 20 SMA heads firmly lower below the longer ones, all of them above the current level. Technical indicators bounced just modestly, holding on to extreme oversold levels.
Support levels: 1.1885 1.1840 1.1790
Resistance levels: 1.1970 1.2020 1.2060
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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.
