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.
Recommended content
Editors’ Picks
EUR/USD trades weak below 1.0800 amid Good Friday lull, ahead of US PCE
EUR/USD remains depressed below 1.0800, as traders lack directional impetus amid minimal volatility and thin liquidity on Good Friday. The pair keenly awaits the US PCE inflation data and Fed Chair Powell's speech for fresh hints on next week's price action.
GBP/USD holds steady above 1.2600 as markets stay calm on Good Friday
GBP/USD trades sideways above 1.2600 amid a typical Good Friday trading lull. A broadly firmer US Dollar could keep any upside attempts limited in the pair ahead of the US PCE inflation data and Fed Chair Powell's appearance.
Gold ends Q1 2024 at record highs, what’s next?
Gold is sitting at an all-time high of $2,236, lacking a trading impetus amid holiday-thinned conditions on Good Friday. Most major world markets, including the United States are closed in observance of Holy Friday, leaving volatility around Gold price highly subdued.
Ripple's move above this key level could trigger nearly 50% rally for XRP
Ripple price has overcome a critical resistance level and flipped into a support floor on the weekly time frame. This development happened while XRP tightly consolidated for roughly 250 days.
US core PCE inflation set to ease in February on month as Federal Reserve rate cut bets for June mount
The core Personal Consumption Expenditures Price Index is set to rise 0.3% MoM and 2.8% YoY in February. The revised Summary of Projections showed that policymakers upwardly revised end-2024 core PCE forecast to 2.6% from 2.4%.