EUR/USD Forecast: Bears Attacking Critical Support, Nonfarm Payrolls Trigger A Bounce

Is King Dollar reclaiming its throne? The greenback has been extending its comeback, buoyed by rising bond yields. Democrats’ win in Georgia gives President-elect Joe Biden’s party control of the Senate – and a path to vast expenditure.

The new administration may opt for a stimulus package worth as much as $3 trillion, including considerable infrastructure spending on top of pandemic-relief measures. Prospects of more government debt push investors away from Treasuries, with the ten-year yield floating around 1.1%. In turn, that makes the dollar more attractive.

Markets are looking to the medium term and continue shrugging off the historic raid of the Capitol by President Donald Trump supporters. In the short term, cabinet resignations and growing Democratic calls for his impeachment are dramatic, but an early departure – with only 12 days to go – makes little difference to Wall Street.

The focus shifts to the King of economic indicators – US Nonfarm Payrolls. The economic calendar is pointing to an increase of fewer than 100,000 jobs in December, a considerable slowdown, and a result of the winter wave of the virus. Leading indicators toward the event were mixed. One worrying statistic was ADP’s private-sector labor report, which showed a loss of 123,000 jobs.

If the official figures also show a squeeze in hiring, the dollar could drop on expectations of more stimulus from the central bank. Jerome Powell, Chairman of the Federal Reserve, speaks next week and may provide hints toward the upcoming Fed meeting later this month.

Do vaccines work against the new variants? Pfizer said that the solution is developed with BioNTech is efficient against the more sophisticated South African strain, cheering investors. On the other hand, British scientists and also politicians cast doubts about it – and more data is needed. Ursula von der Leyen, President of the European Commission, announced the EU secured more doses of the vaccine.

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