EUR/USD dropped sharply in response to robust US retail sales and rising US yields. Yohay Elam, an Analyst at FXStreet, explains why bulls may come on top as three forces fight for influence.

Key quotes

“President Joe Biden continues pushing through his proposed $1.9 trillion coronavirus relief package. If Biden gets a smaller package – or any delay – would push investors back to bonds amid prospects of lower growth and less debt issuance. In turn, softer yields would make the dollar less attractive. All in all, progress on large stimulus is dollar positive and any road bumps would weigh on it.”

“The Federal Reserve's meeting minutes showed that the central bank is upbeat on America's growth prospects in 2021 – more than beforehand. However, the Fed seems unmoved from all the talk about higher inflation and is unlikely to raise rates nor taper its bond-buying scheme. Under these circumstances, the greenback will likely remain under pressure.”

“EUR/USD's most recent downward move was triggered by superb US Retail Sales – volume leaped by 5.3% in January, far above expectations. Some are concerned that this good news is bad news – as it may lower pressure for stimulus. However, unemployment remains high, with some ten million Americans still out of work. Weekly jobless claims are set to provide a reminder that the economy is still struggling.”

“Bears have taken over – EUR/USD has dropped below 1.2055, which has been serving as a separator of ranges since mid-January. The currency pair is now on the lower side of this critical barrier. Support awaits at 1.2020, the fresh trough, and then by the round 1.20 level. The aforementioned 1.2055 level now switches to resistance, and it is followed by 1.2080 and 1.2115.”

 

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.

Feed news Join Telegram

Recommended content


Recommended content

Editors’ Picks

EUR/USD rises above 1.0900 after upbeat EU data

EUR/USD rises above 1.0900 after upbeat EU data

EUR/USD has gained traction and climbed above 1.0900 in the European session after the upbeat sentiment data from the Eurozone area helped the Euro gather strength. Meanwhile, the US Dollar stays on the back foot despite the cautious market mood. 

EUR/USD News

GBP/USD gains traction, trades above 1.2400

GBP/USD gains traction, trades above 1.2400

GBP/USD has gathered recovery momentum and advanced beyond 1.2400 on Monday. The modest selling pressure surrounding the US Dollar ahead of key central bank policy announcements later this week seems to be helping the pair push higher.

GBP/USD News

Gold finds support, rebounds to $1,930 area

Gold finds support, rebounds to $1,930 area

Gold price has recovered toward $1,930 and erased its daily losses. With the benchmark 10-year US Treasury bond yield gaining more than 1% on the day above 3.5%, however, XAU/USD is struggling to gather further bullish momentum.

Gold News

Why Ethereum bears need to be cautious about shorting ETH before $2,000

Why Ethereum bears need to be cautious about shorting ETH before $2,000

Ethereum price has been consolidating after the January rally subsided after three weeks. This tightening continues even after BTC shot up 3% over the weekend. Therefore, a short-term spike in buying pressure should is likely. 

Read more

Big risk this week Fed hikes 50 points

Big risk this week Fed hikes 50 points

While the entire global investment community is apparently very excited about the US Fed slowing its rate increases to 25 bps, there are strong reasons for arguing why another 50 bps rate hike, or two, are still on the menu.

Read more

Forex MAJORS

Cryptocurrencies

Signatures