EUR/USD Forecast: More falls to come? Winds of change at the Fed, bearish technicals, point lower

The Federal Reserve is set to print fewer dollars already this year – or at least announce such a move – according to new messages coming from officials. That has been supporting the dollar. The euro has reasons to fight back, but will likely be overwhelmed for now.

Fed Vice-Chair Richard Clarida said he wants the bank to announce a reduction of its $120 billion/month bond-buying scheme this year and added that risks to his inflation outlook are to the upside. He also seemed somewhat impatient about employment – setting a 3.8% jobless rate as a point in which to tighten, regardless of the participation rate. 

Clarida was joined by Mary Daly, President of the San Francisco Fed, which opened the door to tapering already this year. She is usually a dove. On Thursday, Fed Governor Christopher Waller is set to speak, and he may add fuel to the fire. 

Comments from the world's most powerful bank outweighed mixed economic data. While the ISM Services Purchasing Managers' Index beat estimates with 64.1 points, ADP's Nonfarm Payrolls missed estimates with only 330,000 private-sector jobs in July.

Both indicators serve as hints toward Friday's official Nonfarm Payrolls report. Expectations are now lower after ADP's figure – despite a weak correlation between the two figures. That could also be a boon for dollar bulls.

See 

• US July Nonfarm Payrolls Preview: Analyzing major pairs' reaction to NFP surprises
• Nonfarm Payrolls Preview: Why the dollar could surge in (almost) any scenario

In the old continent, German Factory Orders rose by 4.1% in June, roughly double the early expectations. Moreover, Markit's final Services PMIs also exceeded estimates, showing robust growth prospects.

Europe also has an advantage when it comes to coronavirus – the EU vaccination rate has more than caught up with America. Falling cases in Spain already point to an earlier exit from the current Delta variant-induced wave. It will likely take longer in the US.

Nevertheless, central banks have the upper hand and the Fed's newfound hawkish is set to keep the dollar bid. At least for now.

EUR/USD Technical Analysis

Euro/dollar has fallen below both the 50 and 200 Simple Moving Averages on the four-hour chart. Moreover, momentum remains to the downside, adding to the bearish sentiment. 

Support is at the daily low of 1.1828, which is backed up by the 100 SMA. Further down, the next noteworthy cushion is at 1.1775, followed by 1.1750.

Resistance is at 1.1850, which is the daily high and it is also where the 50 and 200 SMAs hit the price. Further above, 1.1905 and 1.1945 await euro/dollar bulls.