The EUR/USD is on track for the first weekly decline in three weeks as the recent rally starts losing momentum. The pair is trading at 1.2122, which is lower than the year-to-date low of 1.2345.
US Dollar bounces back
The EUR/USD is falling today after two important speeches yesterday. In his speech, Joe Biden unveiled a $1.9 trillion stimulus package he hopes will help restart the struggling American economy. The new package will have funds for individuals, vaccine distribution, and states.
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The statement came on the same day that the Bureau of Labour Statistics (BLS) released weak initial jobless claims numbers. The data showed that almost 1 million people signed for initial jobless claims last week as more states announced stay-at-home orders. Most of these people are also taking advantage of enhanced unemployment insurance.
Meanwhile, Jerome Powell, the head of the Federal Reserve sounded relatively dovish yesterday. In his closely-watched speech, he said that “now was not the time” to talk about changing monetary policy. This statement came a day after some of his colleagues hinted at rate hikes and quantitative easing tapering.
The EUR/USD is also reacting to the weak US retail sales numbers. The data showed that the overall retail sales dropped by 0.7% in December, leading to a 2.9% annualised increase. Core sales, which exclude the volatile food and energy products, declined by 1.4%. Economists were expecting the core sales to rise by 1.3%. These numbers show the vital importance of more stimulus to the economy.
Further data showed that the core PPI rose by 0.1% in December and at an annual rate of 1.2%. The PPI is a vital measure of inflation.
EUR/USD technical analysis
On the weekly chart, we see that the EUR/USD has been on a strong rally starting from March last year when it was trading at 1.0630. It has risen by more than 14% in that period and is 3.70% below the 2018 high of 1.2561. However, the pair seems to be starting a divergence pattern as evidenced by the Relative Strength Index (RSI) and the MACD. Therefore, I believe that the pair will continue falling as bears target the next support at 1.2000. This is both an important psychological level and the highest level in August. You can practice this price action using a free demo account.