EUR/USD: Fed action to alleviate any bearish pressure

EUR/USD has been edging lower in reaction to stimulus, shrugging off Capitol storming. US data and the political fallout from the riots will likely shape trading before Fed hopes could boost the world’s most popular currency pair, Yohay Elam, an Analyst at FXStreet, reports.

Key quotes

“The mob supporting President Donald Trump has failed in its coup attempt – and EUR/USD will likely fall short of ending the broad rally. Congress certified Joe Biden as the winner early on Thursday. Nevertheless, scenes reminiscent of the third world did little to sway markets as investors have seen the dramatic scenes as having no term impact on economics.” 

“Biden's party secured effective control of the upper chamber after both Raphael Warnock and Jon Ossof won their runoff races in Georgia. That would enable Democrats to pass another generous stimulus package – yet probably insufficient to make market-unfriendly reforms. Dems will only have a slim 51:50 majority.” 

“Any increase in the dollar may be temporary. It is essential to remember that the Federal Reserve is ready to buy more bonds if necessary. The Fed's meeting minutes from the latest meeting showed some on the board are already eyeing additional monetary stimulus.” 

“ADP's labor figures disappointed with a loss of 123,000 positions, contrary to an increase that was expected. Will Friday's official Nonfarm Payrolls also show a squeeze in hiring? That remains an open question, but bad news for American workers could turn into good news for dollar bears on expectations for Fed action.” 

“Thursday's economic calendar features jobless claims for the last week of 2020 and the ISM Services Purchasing Managers' Index for December – a hint for the NFP. Devastating figures could boost EUR/USD, but there is a higher chance it would happen on Friday.” 

“Some support awaits at 1.2265, the daily low, followed by 1.2245, a low point early in the week. Resistance is at 1.2310, the previous 2021 high, followed by 1.2350, which is emerging as a double top.”