EUR/USD: Dollar remains bid on Fed's grim warning


  • EUR/USD appears poised to move lower after rejection at 1.09.
  • Powell's comments on the economy and negative rates continue to bode well for the US dollar.
  • US data is likely to show another 2.5 million workers filed for jobless claims in the week ended May 8.

The US dollar is extending overnight gains, sending EUR/USD lower amid risk-off action in the Asian stock markets. 

At press time, EUR/USD is trading under 1.0810, representing a 0.10% decline on the day, having dropped from 1.0896 to 1.0812 on Wednesday. Meanwhile, major Asian equity indices like South Korea's Kospi, Hong Kong's Hang Seng, and Australia's S&P/ASX 200 are flashing red. 

Prolonged slowdown

Investors are shunning risk and buying US dollars possibly due to renewed growth concerns. Federal Reserve's chairman warned on Wednesday that scope and speed of the ongoing economic downturn are without modern precedent, significantly worse than any recession since World War II. Powell warned that deeper and longer downturn may be seen if the Congress fails to provide additional fiscal support. 

As a result, the US stocks dropped and the US dollar picked up a bid. The decline in EUR/USD seen at press time is an extension of the overnight losses triggered by the broad-based demand for the greenback. 

Dollar's strength could be also be attributed to Powell's comment that the central bank is not looking at negative interest rates as an option. On Tuesday, the Fed fund futures contracts were pricing negative rates in June 2021. 

Eyes US data

The US Initial Jobless Claims, due at 12:30 GMT, is expected to show that 2.5 million people filed for first-time claims for state unemployment insurance in the week ended May 8. 

Risk aversion will likely worsen, sending EUR/USD lower if the data shows a bigger-than-expected rise in the jobless claims. That would validate Goldman Sachs' decision to raise its peak US jobless rate forecast to 25% from the previous estimate of 15%. 

The final German Consumer Price Index for April, scheduled for release at 06:00 GMT, could turn out to be a non-event for markets unless the number prints significantly below estimates. In that case, the EUR may face stronger selling pressure. 

Technical levels

    1. R3 1.0958
    2. R2 1.0927
    3. R1 1.0873
  1. PP 1.0842
    1. S1 1.0788
    2. S2 1.0757
    3. S3 1.0703

 

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.

Feed news

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Forex News


Latest Forex News

Editors’ Picks

EUR/USD tests daily lows above 1.1300 amid broad dollar recovery

EUR/USD trades close to 1.1300 amid a broad-based US dollar recovery. The shared currency remains at the mercy of the broader market sentiment as the data docket is light on Monday. COVID-19 stats in focus. 

EUR/USD News

GBP/USD drops towards 1.2600 as US dollar rebounds

GBP/USD extends the drop towards 1.2600 amid the broad US dollar comeback. UK Michael Gove pushes to prepare for Brexit, as differences prevail in post-transition talks. BoE’s Bailey to speak later today.

GBP/USD News

Gold sits near daily tops, just below $1810 level

A combination of supporting factors assisted gold to regain positive traction on Monday. Sustained USD selling remained supportive amid concerns about rising COVID-19 cases. The prevalent risk-on mood might turn out to be the only factor capping any strong gains.

Gold News

Dominance war to push Ethereum to $270

The Altcoin segment is still in full swing while the crypto board leaders, Bitcoin and Ethereum, remain stuck at the same levels as in recent weeks. The dispute for market share, or dominance in technical terms, remains at a point of maximum tension. 

Read more

WTI: 200-HMA probes bears above $40.00

WTI stays pressured beyond $40.00 despite multiple bounces off 200-HMA. MACD conditions suggest bears rolling up their sleeves for entry. Bulls will have multiple upside barriers beyond $41.00.

Oil News

Forex MAJORS

Cryptocurrencies

Signatures