Daily Analysis: EURUSD retreats ahead of Powell testimony

TigerWit Africa

EURUSD bullish trend remains intact ahead of Fed Chair Powell’s testimony before the US Congress later today. Currently, EURUSD is shedding profit as it’s currently finding minor support at 1.2150.

The euro-dollar is primarily being driven by the dollar more than anything else. The inverse correlation between the Dollar Index and EURUSD remains firm. Thus, the pressure on the dollar is lifting the currency pair. In the Asian session, the pair tested the 1.217 minor resistance but lack of momentum drove it back below 1.215 early in the London session.

The euro-zone CPI data came just as the market expected. YoY CPI and core CPI met market expectations at 0.9% and 1.4% respectively. The monthly CPI was lower than the last month’s but met the consensus forecast. Looking ahead, the market eyes Powell’s testimony at the Congress. Currently, EURUSD oscillates around 1.215. However, the overwhelming sentiment continues to put pressure on the dollar and thus painting a bullish picture on the EURUSD chart.

All eyes on Powell at the Congress

Jerome Powell will speak about different topics that affect the economy as the Chief of the US’s Central Bank. However, markets might focus more on the bank’s bond-purchasing program. In the last FOMC meeting, the bank continued its $120 billion bond-purchasing program and maintained a near-zero interest rate.

Since the turn of the year, the US treasury yield has been very much progressive. Together with improving growth data and a massive retail sales rebound, the bank is clearly seeing the impact of the vaccine-led and stimulus-driven economic recovery. However, reports from the labor sector have seen much lower improvement. Will Powell signal a cut or pause in the bank’s bond-purchasing program or emphasize more support?

Most likely, Powell will signal for further support but with inflation in sight.  The mandate of the bank is to keep the inflation rate floating around 2% and also drive in maximum employment. Over 10 million Americans are still jobless and the inflation rate is currently at 1.4%. The unemployment rate is at 6.3% – far higher than the 3-4% maintained prior to Covid lockdowns in 2020. The bank will most likely prioritize employment by keeping rates at the current 0.25% and continue with its current QE plan as the vaccines expectedly clear out the virus. Powell’s comments will go similar to Yellen’s. We will most likely see more pressure on the dollar. EURUSD, on the other hand, should break above 1.219 resistance to continue the bullish trend.

EURUSD technical analysis – bullish resurgence above 1.22?

 

EURUSD Chart (30 Mins)

After the end of the January bearish correction at 1.195, we have embarked on a bullish impulse wave surge toward 1.245. The first and second sub-waves ended at 1.215 and 1.2025 respectively. The third sub-wave is currently in motion and rightly so. The continuation of the current dip should be limited above 1.209. To the upside, the bullish trend should continue with a breach of the 1.219 resistance after the market overcomes 1.217. The 3rd wave (circled in red) should hit 1.245 in an ideal situation. All eyes on Powell for the next market trigger.

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