The euro-dollar pair continues its downward path: on the first day of the trading week, the price confidently broke through the resistance level of 1.1900 and reached the middle of the 18th figure, demonstrating a pronounced bearish trend. For four trading days, the pair fell by almost 300 points, almost without encountering any serious resistance on the way. Moreover, the general fundamental background, as well as technical indicators continue to signal the continuation of the "bearish banquet". The last victory of the Democrats in the Congress, as well as the strong Nonfarm against the backdrop of the restrained and optimistic position of the Fed, significantly increased the demand for the US dollar. At the same time, the euro is not able to oppose the greenback. In such conditions, traders of EUR/USD quite naturally changed the price level of 1.20-1.22 to the level of 1.16-1.18, within which they traded for three months – last autumn.
Last weekend, the dollar bulls had another reason to strengthen their positions. The US Senate, after a 27-hour debate, finally passed the long-suffering American Relief Plan, totaling $1.9 trillion. And it should be noted that market participants were not one hundred percent sure that Congressmen would approve a resonant bill, even though both houses of Congress are now controlled by Democrats.
The fact is that they do not have "spare" votes in the upper house of Congress - the position of each Democratic congressman is of key importance. Ahead of the voting, it became known that one of the representatives of the Democratic Party, Congressman Joe Manchin, opposed the presidential initiative: in his opinion, such large-scale cash injections will "overheat" the American economy. He repeated his position during the discussion of the bill, threatening to fail the vote. The negotiations with him lasted more than 11 hours. According to their results, Manchin decided to change his mind after all, voting "for". As a result, 50 Democratic senators supported the law, while 49 (Republicans) opposed it. By the way, the congressmen still failed one of the points of the aid package - they refused to raise the minimum wage to $15 per hour.
Nevertheless, the adopted bill allowed traders to be optimistic about the future. The market is again talking about the fact that the Federal Reserve will be forced to prematurely reduce stimulus programs and even raise the interest rate, thereby preventing the economy from overheating. The yield on 10-year Treasury, which acts as a kind of barometer of market sentiment, again reached 1.6%. The last time this figure was at similar heights was in January 2020 - that is, immediately after the signing of the first phase of the US-China trade deal and a few weeks before the coronavirus crisis began.
At the moment, the "coronavirus factor" is viewed from a different angle: through the prism of anti-covid vaccination, where the US is also ahead of other countries. According to the latest data, the United States is the leader in the number of vaccines administered - 18% of residents have already received one vaccination, and 9.2% have received twice. We are talking about the introduction of 90 million doses. China is in second place, where 53 million doses were administered. Meanwhile, the countries of the European Union are lagging - with a total of just over 40 million doses of vaccines administered.
This fact added to the optimistic picture of a fundamental nature, especially against the background of fairly strong data on the growth of the US labor market. Let me remind you that the main components of Nonfarm payrolls came out in the "green zone": the number of people employed in the non-agricultural sector increased by 379,000 (with a growth forecast of 117,000), and in the private sector by 420,000 (with a growth forecast of 210,000). The unemployment rate fell to 6.2% (although experts had expected an increase to 6.5%).
Thus, the general fundamental background for the US dollar contributes to the further decline of the EUR/USD pair. The approval of a large-scale package of assistance to the US economy, strong Nonfarm, high vaccination rates in the US, rising treasury yields, and the lack of any clear counterarguments from the euro - all these fundamental factors pull the pair into the area of the 17th figure.
Technically, on the daily chart, the EUR/USD pair is below the lower line of the Bollinger Bands indicator and below all the lines of the Ichimoku indicator (including under the Kumo cloud), which demonstrates the bearish Parade of Lines signal, warning of further price declines. The main support level (the intermediate barrier is target 1.1800) is located at 1.1750 - this is the lower line of the Bollinger Bands indicator on the weekly chart and at the same time the Tenkan-sen line on the monthly time frame. Selling EUR/USD can be considered either from current positions or during corrective upward rollbacks.
