After high US inflation statistics and a soft bond sale, the EUR/USD has fallen below 1.18. What’s next, 1.17? According to Yohay Elam, an analyst at FXStreet, Fed Chair Powell’s testimony is essential to the next steps.
“The Fed Chair may still depreciate the dollar by claiming that price increases are only temporary. Powell, on the other hand, might revert to his more hawkish attitude from June, when he hinted that inflation could be here to stay if he sees the evidence differently.”
“The focus of the Fed Chair is on employment and inflation, but he will likely speak about how the reopening has influenced the broader economy – and the risks to that rebirth. The Delta covid variety is spreading across the United States, with infection levels more than doubling from two weeks ago. The greenback might weaken if he signals that as a risk that could postpone tapering.”
“After the dust settles in the United States, attention may turn to Europe’s Delta wave, which has primarily affected the Netherlands, Spain, and Portugal, but is also affecting Germany and France. It may eventually weigh on the euro, while safe-haven flows may support the dollar. But that’ll have to wait till after the Powell effect fades.”
“The fresh multi-month low of 1.1772, followed by 1.1740 and finally 1.17 – levels last seen early in the spring – provide support.”
“1.1810, which was a low mark in June, provides some resistance. Finally comes 1.1825, which was a swing low in early July, and then 1.1885.”/n
