The greenback comeback is alive and kicking. The EUR/USD pair has already dropped some 60 pips from the peak of 1.2222, and more may be in store. A US bond auction and Fed speakers hold the key to the next moves, Yohay Elam, an Analyst at FXStreet, reports.
“The US currency dived on Tuesday after investors rushed to buy ten-year Treasuries. The consequent fall in yields triggered the downfall – making Wednesday's 30-year auction more important than usual. High demand could weigh on the greenback, but long-term debt could attract less enthusiasm.”
“Federal Reserve Governor Lael Brainard and Vice-Chairman Richard Claudia will both speak later in the day. If they mention tapering – even by denying it – the dollar has room to advance. Fewer dollars printed mean higher yields and a stronger dollar.”
“Two weeks before the Fed announces its rate decision, it publishes a document consisting of anecdotal reports from its regions. If the report – usually a low key event – includes optimism about fiscal stimulus and the vaccine, it would also boost the greenback.”
“Critical support awaits at 1.2125 – the triple-bottom initially tackled in mid-December and tackled in recent days. There are several support lines below, but these are weaker – 1.21, 1.2075, 1.2160 and 1.2040.”
“Some resistance awaits at 1.2180, which temporarily capped EUR/USD on Tuesday. It is followed by 1.2222, the recent high, followed by 1.2240, which provided support last week.”
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