EUR/USD set to extend its falls as taper talk pushes dollar higher

EUR/USD has been edging lower amid signs the Fed is inching toward buying fewer bonds. Time to tumble? Yohay Elam, an Analyst at FXStreet, believes so.

Three signs Fed is tiptoeing toward tapering

“Time to ‘think about thinking about tapering’ – Philadelphia Fed President Patrick Harker has paraphrased Chair Jerome Powell's previous comments on refraining from a rate hike. Harker's comments serve as the first hint that the bank is moving toward tightening, supporting the dollar.” 

“The Fed announced that pandemic-era corporate bond and ETF program will wind down. The total of both portfolios is a minuscule $13.6 billion, less than what the Fed buys in a week under its broader bond-buying scheme. Nevertheless, this baby step serves as another hint toward a larger move.” 

“The Federal Reserve's Beige Book pointed to growing price pressures. This document includes anecdotal evidence from the bank's contact across the country and is published toward its all-important rate decision. If the Fed has this new information on its desk, perhaps it could signal fewer bond buys in two weeks.”

“Euro/dollar has slipped below the 50 Simple Moving Average on the four-hour chart and momentum has flipped back to the downside. It is now leaning on the 100 SMA and seems to be on the verge of breaking lower.” 

“Support awaits at 1.2175, a cushion from earlier this week, followed by 1.2160 and 1.2130. Resistance is at 1.2220, which capped a recovery attempt. It is followed by 1.2255, the weekly high, and then by 1.2266, May's peak.”