EUR/USD: Break Or Bounce At The Triple-top? Three Factors Point To The Downside

Is the taper tantrum making a comeback? Markets are far from breaking down, but when the world’s most powerful central bank merely talks about printing fewer dollars at some point in the future, the greenback immediately gains ground. EUR/USD is off the highs and may continue

Three factors pointing to EUR/USD falls

1) Greenback comeback

Jerome Powell, Chair of the Federal Reserve, said that the bank would first taper down its bond-buying scheme before raising interest rates, something markets had already anticipated. He reiterated his assessment that the US economy is at an inflection point of more robust growth and urged caution while pledging to keep the accommodative policy in place until “substantial progress” is made.

While most of his comments were not news, the mere talk of buying fewer than $120 billion worth of bonds per month at some point seems like the first warning shot.

Richard Clarida, Powell’s Vice-Chair, hinted that an indication of such a move to curb purchases of Treasuries would come at the meeting including the release of new forecasts. That implies such a hint may come as soon as June, with a reduction in buying perhaps coming around year-end.

Will the dollar continue higher? These Fed comments have come ahead of the all-important release of US Retail Sales statistics for March. After a drop in February, the economic calendar is pointing to a leap of over 5% – and some even expect to double that figure. In the middle of last month, shoppers received stimulus checks from the government, with some probably spent immediately. A surge may boost the dollar.

2) Euro issues

While the EU announced it would receive 50 million additional doses of Pfizer’s COVID-19 vaccines in the second quarter, immunization uncertainty remains substantial. The fate of Johnson & Johnson’s jabs is in the air as authorities continue assessing rare cases of blood clots linked to the inoculations.

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