- EUR/USD has been on the back foot amid tame eurozone inflation and covid fears.
- US ADP jobs data and Fed hawkish could push the dollar higher.
- Wednesday's four-hour chart is pointing to further falls.
Inflation is coming – but not so fast and not to the eurozone. Fresh Consumer Price Index figures for June have shown that headline inflation is only 1.9% YoY and Core CPI has slipped to 0.9%. That is a far cry from 3.4% in the US Federal Reserve's preferred measure of underlying inflation. This gap is EUR/USD negative.
The common currency is also struggling with the spread of the Delta variant, which is more prevalent in the old continent than in America. Britain has already delayed its reopening and with fewer vaccinated people in Europe, the recovery could be postponed.
The last day of the quarter could bring some jitters – and potentially dollar weakness to counter the greenback's latest upswing. However, fresh data from ADP's private-sector jobs report for June could help the greenback hold on.
The economic calendar is pointing to an increase of 600,000, a low bar in comparison to May's robust gain of 978,000. It is essential to note that the correlation between ADP's figures and official ones has weakened.
ADP Nonfarm Payrolls Preview: Going contrarian? How to trade this leading indicator
Another factor supporting the dollar is the Federal Reserve. Christopher Waller, a Governor at the bank, said he supports scaling back some of the support – printing fewer dollars to buy bonds. On the other hand, Thomas Barkin of the Richmond Fed – who is slated to speak again on Wednesday – wants to see more progress.
The Fed's next moves heavily depend on Friday's highly anticipated Nonfarm Payrolls, FXStreet's updated analysis shows how currencies tend to react:
US June Nonfarm Payrolls Preview: Analyzing major pairs' reaction to NFP surprises
All in all, the American economy is leading while Europe is lagging, and favors a bearish bias.
EUR/USD Technical Analysis
Euro/dollar has failed to recapture the 50 Simple Moving Average on the four-hour chart and is also dragged lower by downside momentum – while the Relative Strength Index (RSI) is far from oversold conditions.
Overall, bears are in control.
Some support awaits at the daily low of 1.1885, followed by 1.1850, which was a low point in mid-June. Further below, the next levels to watch are 1.18 and 1.1760.
Looking up, some resistance is at 1.1920, a support line from last week, followed by the late Juen peak of 1.1975. Above 1.20, a significant cap can be seen only at 1.2050.
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