EUR/USD: Levels to watch after Yellen’s interest rates comment
- The EUR/USD pair retreated after the relatively hawkish statement by Janet Yellen.
- She said that the Fed ought to start hiking interest rates to prevent the economy from overheating.
- The pair may continue falling ahead of the US non-farm payroll data.
The EUR/USD price is little changed as the market reflects on the recent statement on interest rates by Janet Yellen and European data. It is trading at 1.2015, which is slightly above the intraday low of 1.1985.
Janet Yellen talks about interest rates
Janet Yellen is a popular economist who is currently serving as the Treasury Secretary. Before her new role, she served as the Federal Reserve Chair, where she helped the bank move from zero interest rates a few years ago. Therefore, the market tends to respect her opinion.
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In a statement yesterday, she said that the bank will likely start hiking interest rates gradually to prevent the economy from overheating. While the Treasury Secretary has no power to direct the Fed on the actions to take, her opinion can sway the members’ minds.
Furthermore, the US economy is doing relatively well. Stocks are hovering at an all-time high while economic numbers have been robust. Today, data by ADP showed that the private sector added more than 742,000 jobs in April after adding more than 525,000 jobs in the previous month.
These data came a day before the latest initial jobless claims numbers and two days before the official non-farm payroll (NFP) data.
The EUR/USD is wavering as the market digests the latest mixed economic data from Europe. According to Markit, the services sector did relatively well in April. The services PMI increased from 49.6 to 50.5.
However, the sector struggled in key economies like Germany, Italy, and France. In Germany, the PMI declined from 51.5 in March to 49.9 in April while in Italy, the PMI fell to 47.3. Still, there is a possibility that the sector will rebound as the governments improve their vaccination pace.
EUR/USD technical forecast
The four-hour chart shows that the EUR/USD has been retreating after rising to a multi-month high of 1.2154 last month. It is between the 38.2% and 23.6% Fibonacci retracement level. Also, the pair has declined below the 25-day and 15-day moving averages, which is also a bearish signal. It has also formed a head and shoulders pattern. Therefore, the pair will likely keep retreating as the market target the 50% retracement level at 1.1930.