- EUR/USD has dropped sharply after the Fed's Powell refused to commit to lowering yields.
- All eyes are on America's Nonfarm Payrolls report for February.
- Friday's four-hour chart is showing bears are in the lead.
"Caught my attention" – is the only comment the world's most powerful central banker has had to say about rising US bond yields that markets are worried about, triggering a market selloff and a dollar bull run. Federal Reserve Chair Jerome Powell has committed to supporting the recovering economy, dismissed inflation concerns and remains that ten million Americans are out of work. By sticking to the script, he stuck it to markets.
The Fed now enters its "blackout period" ahead of the March 17 rate decision, but markets are anything but quiet. Returns on ten-year Treasuries have topped 1.55% and EUR/USD is hovering around its 2021 lows of 1.1950.
Investors have little time to digest Powell's punch as they soon have to grapple with February's Nonfarm Payrolls report. The economic calendar is pointing to an increase of 182,000 jobs in the world's largest economy, a relatively modest pace – which could be lower according to leading indicators. Both the ADP report and the ISM Services Purchasing Managers' Index missed estimates.
On the other hand, the ISM MAnufacturing PMI beat estimates and Goldman Sachs, a bank, foresees 250,000 positions gained.
- US Nonfarm Payrolls February Preview: The inflection point
- Nonfarm Payrolls Preview: Dollar booster? Three expectation downers pave way for upside surprise
The main upside drivers for yields and the dollar are vaccines and stimulus. On the medical front, America has hit a pace of two million inoculations per day, increasing the bringing forward the timeline for exiting the crisis.
In Congress, Senate Republicans have slowed the process of approving the new version of President Joe Biden's covid relief package by forcing clerks to read it out loud. However, Democrats have united around a modified version and are set to turn the bill into law sometime next week.
All in all, the dollar has reasons to rise. What about the old continent? While German Factory Orders beat estimates with an increase of 1.4% in January, the EU's vaccination campaign continues at a sluggish pace. Italy's decision to block the sending of jabs to Australia reflects despair rather than strength.
Overall, the NFP and stimulus may give the greenback another boost after Powell's powerful impact.
EUR/USD Technical Analysis
Euro/dollar is trading close to the critical 1.1950 trough – and has been forming a double-bottom there. It last hit that level in early February, a line which serves as the 2021 trough. Will it continue lower? The Relative Strength Index on the four-hour chart is just around 30 – about to enter oversold territory. On the other hand, downside momentum has strengthened and the pair is trading below the 50, 100 and 200 Simple Moving Averages.
Below 1.1950, further support awaits at 1.1930, followed by 1.1880 and 1.1850 – which all played a role in December 2020.
Resistance awaits at 1.1990, which was a swing low earlier in the week, and then by 1.2020, a bottom recorded in late February. The next lines to watch are 1.2050 and 1.2110.
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.