EUR/USD to come under increased pressure amid the Fed's taper talk

EUR/USD is trading below 1.22. Top-tier US figures and concerns about virus variants could push the pair lower, Yohay Elam, an Analyst at FXStreet, reports.

See: EUR/USD to drop substantially towards 1.15 by year-end – ABN Amro

Federal Reserve is tiptoeing towards tapering

“Randal Quarles, a Governor at the Fed, said that the bank could consider having a discussion on reducing purchases in one of the upcoming meetings if conditions improve. Fear that the world's most powerful central bank would begin cutting down on its $120 billion/month bond buys is boosting the dollar.”

“Economists expect a minor upgrade of US first-quarter Gross Domestic Product growth from 6.4% to 6.5% in the second release. Without a major surprise in GDP, the focus will likely be the more recent Durable Goods Orders statistics for April, which are set to show a slower increase in investment. Low expectations mean that a minor upside surprise could boost the dollar.” 

“Another factor supporting the greenback is end-of-month flows. As Monday, May 31, is a bank holiday in the US and the UK, money managers are adjusting their portfolios and this seems to benefit the greenback.” 

“Across the Atlantic, optimism about Europe's vaccine-led recovery seems to be priced into the euro while fears of the variant first identified in India are creeping in. France joined Germany in demanding quarantines from UK visitors, potentially hurting the rebound of the tourism sector.” 

“Support awaits at the daily low of 1.2175, followed by 1.2155, 1.2105 and 1.2075.” 

“Some resistance is at 1.22, which is the daily high. It is then followed by the former triple top of 1.2245, and then by the May peak of 1.2266.”