EUR/USD Forecast: Time to sell? Yellen's inflation and embrace set to outweigh NFP boost

EUR/USD has been in retreat from Friday's NFP-induced levels.
US Treasury Secretary Yellen's embrace of higher inflation is supporting the dollar.
Monday's four-hour chart is showing downtrend resistance looms over the pair.

Yohay Elam FXStreet

Higher rates would a "plus" for the US – these comments by Treasury Secretary Janet Yellen are already supporting the dollar. More may be in store. Yellen has clout due to her current and also former job as Chair of the Federal Reserve. It is no the first time that she provided remarks related to her former job, but she apologized for any misunderstanding after her previous comments. She is not doing so now.

Higher borrowing costs in response to more robust inflation support the greenback and counter the blow that the currency received from Friday's Nonfarm Payrolls. The American economy gained only 559,000 jobs in May, below 664,000 expected and on top of a disappointing increase in April.

That sent the dollar down ahead of the weekend and allowed EUR/USD to jump from near 1.21 to above 1.2150. However, that NFP also contained a silver lining – earnings rose by 0.7%, more than projected – and most importantly, signaling an increase in prices down the line. When workers have more money in their pockets, the consumer more.

See NFP Quick Analysis: Dollar buying opportunity? Two reasons why dollar downing is likely temporary

US Consumer Price Index figures for May are due out only on Thursday, but Yellen's comments help refocus the conversation. Another event due that day is the European Central Bank's rate decision.

The Frankfurt-based institution will likely maintain its policy unchanged as the old continent emerges from the coronavirus crisis after stumbling through the winter. Business sentiment figures have been upbeat and Monday's release of the Sentix Investor Confidence will likely support that view.

However, hopes for a vaccine-led recovery are already priced into the euro.

All in all, EUR/USD may come under additional pressure – at a minimum, correcting some of Friday's gains.

EUR/USD Technical Analysis

Euro/dollar is capped by a downtrend resistance line that was formed in early June and dropped under the 50 and 100 simple moving averages on the four-hour chart. With downside momentum also pressuring the pair, bears are in the lead.

Some support awaits at 1.2130, a swing low from late May, followed by 1.2105, a clear separator of ranges that is the current monthly low. The next levels to watch are 1.2055 and 1.2015.

Some resistance is at 1.2185, Friday's peak, followed by 1.220 and 1.2155, which held EUR/USD down in the past week.

EUR/USD Weekly Forecast: Pressure of Fed after disappointing NFP, eyes on ECB

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

AUD/USD hangs close to monthly lows, still defends 0.7100 ahead of Fed decision

AUD/USD retains its negative bias for the third straight day, defending 0.7100 while trading close to a monthly low in Wednesday's Asian session on Wednesday. The US Dollar stands firm near a two-week high as the anticipated Fed rate hike and oil-driven inflation fears continue to push US bond yields to a multi-year high. Furthermore, escalating Middle East tensions benefit the safe-haven buck and weigh on the risk-sensitive Aussie.

USD/JPY holds firm above 155.00, awaits Fed policy announcements

USD/JPY climbs to a fresh one-week high above 155.00 in the Asian session on Wednesday amid a bullish US Dollar. Oil-driven inflation fears, along with the anticipated Fed rate hike, continue to support surging US bond yields. Moreover, rising US-Iran tensions underpin the USD's reserve currency status. The pair, however, remains below the mid-155.00s as bulls seem hesitant ahead of the Fed decision later today and the BoJ meeting, starting on Thursday.

Gold traders seem noncommittal below $4,350; eyes Fed rate decision

Gold clings to modest intraday gains through the first half of the European session, albeit it lacks follow-through buying and remains below $4,350. The US Dollar eases from a two-week high amid some profit-taking, offering support to the commodity. Traders, however, seem hesitant to place aggressive directional bets and opt to wait on the sidelines heading into the key central bank event risk.

Cardano's bearish breakout warns of a 15% downside risk

Cardano (ADA) hovers around $0.1900 at press time on Wednesday after a 6% decline the previous day, breaking below a crucial support level. Declining on-chain activity across the Cardano ecosystem, with reduced transaction count and Real Economic Value (REV), suggests waning user demand.

Fed decision in focus

Starting with the most important, the Fed decision. Heading into the event, data showed a rather punchy US August jobs report, which, you will likely recall, triggered a hawkish Fed rate repricing in rates markets. However, the recent US August CPI print mattered more.

How Japan became the World's Banker and why that era may be ending

Japan's ultra-low interest rates helped finance trillions of dollars in global investments for more than a decade, making the Japanese Yen one of the world’s cheapest sources of funding. With the Bank of Japan expected to tighten policy again this week, that advantage may be entering a new phase. While most major economies raised interest rates, Japan remained the world's outlier.