- EUR/USD has been reversing its gains as US yields jump higher in a Fed rethink.
- US jobless claims and the EU's vaccine issues are also eyed.
- Thursday's four-hour chart is pointing to further losses.
All yield to the US dollar – the greenback is gaining new ground as the dust settles from the Federal Reserve's dovish decision. For the vulnerable euro, there is only one direction – down.
The Fed's "dot-plot" surprised markets on Wednesday with a rate hike projected only for 2024. Moreover, Chair Jerome Powell stressed that any signals on tapering down the pace of bond buys – let alone rate hikes – will come only after economic improvement materializes. His "I'll believe when I see it" approach contrasts the bank's historic stance of trying to stay ahead of the curve and preempting future inflation.
- Powell and the FOMC: Is it really about the Fed Funds Rate?
- Fed Analysis: Dovish dots down dollar, why this may be a buy opportunity
The initial reaction of lower yields and a weaker dollar has faded on Thursday. Investors are focusing on more upbeat aspects of the Fed decision – upgraded growth and employment projections. Moreover, markets have had second thoughts also on Powell's repeated statement that the inflation in the spring is transitory. The rapid sell-off in bonds – with the ten-year Treasury yields hitting 1.744% – has jolted the dollar higher.
Will the greenback continue gaining ground? That partially depends on weekly jobless claims, which are set to post a marginal decline. However, further responses to the Fed and yields have the upper hand.
See Initial Jobless Claims Preview: Improvement is relative
In the bigger scheme of things, the dollar is rising amid a strong economy, benefiting from an injection of $1.9 trillion in stimulus funds and also a rapid vaccination campaign.
That contrasts with ongoing immunization issues in the old continent. EU Commission President Ursula von der Leyen has threatened to ban exports of vaccines made in Europe to the UK, as the row intensifies. In the meantime, most European countries have suspended the administration of AstraZeneca's jabs amid concerns about safety.
Even if the European Medicines Agency gives the green light to resume the usage of Astra's doses, many Europeans are set to refuse to receive them. Overall, the eurozone is set to lag behind in its recovery from the crisis – and that may weigh on the euro.
Overall, EUR/USD is set to remain under pressure.
EUR/USD Technical Analysis
Euro/dollar has been rejected at 1.1990 – the same cap it hit late last week. That double-top also converges with the 100 Simple Moving Average on the four-hour chart. Momentum has flipped back to the downside and the pair also trades below the 200 SMA. Bulls may find solace in the pair's trade above the 50 SMA.
Support awaits at the daily low of 1.1935, followed by 1.1910, which was a cushion earlier in the week. Further down, 1.1885 and 1.1836 are eyed.
Resistance is at 1.1965, a cap from last week, and then the 1.1990 mentioned earlier. Further above, 1.2020 and 1.2055 await EUR/USD.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
AUD/USD: Uptrend remains capped by 0.6650
AUD/USD could not sustain the multi-session march north and faltered once again ahead of the 0.6650 region on the back of the strong rebound in the Greenback and the prevailing risk-off mood.
EUR/USD meets a tough barrier around 1.0800
The resurgence of the bid bias in the Greenback weighed on the risk-linked assets and motivated EUR/USD to retreat to the 1.0750 region after another failed attempt to retest the 1.0800 zone.
Gold eases toward $2,310 amid a better market mood
After falling to $2,310 in the early European session, Gold recovered to the $2,310 area in the second half of the day. The benchmark 10-year US Treasury bond yield stays in negative territory below 4.5% and helps XAU/USD find support.
Bitcoin price coils up for 20% climb, Standard Chartered forecasts more gains for BTC
Bitcoin (BTC) price remains devoid of directional bias, trading sideways as part of a horizontal chop. However, this may be short-lived as BTC price action consolidates in a bullish reversal pattern on the one-day time frame.
What does stagflation mean for commodity prices?
What a difference a quarter makes. The Federal Reserve rang in 2024 with a bout of optimism that inflation was coming down to their 2% target. But that optimism has now evaporated as the reality of stickier-than-expected inflation becomes more evident.