Stock markets are back to “risk-on” after Fed Chair Powell reiterated his support for the economy. The rise in shares and retreat of the dollar comes despite new highs in US yields. Bitcoin continues battling $50,000 and GameStop has shot up again. US GDP, Durable Goods Orders, and Unemployment Claims are eyed.
Jerome Powell, Chairman of the Federal Reserve, dismissed inflation fears also in his second testimony, only hoping to reach the bank’s 2% target within three years. The world’s most powerful central banker stressed that ten million Americans are out of work.
Powell’s words joined upbeat news on the vaccine front: The US FDA gave its nod to Johnson and Johnson’s COVID-19 single-shot immunization, and a widespread study in Israel showed that the Pfizer/BioNTech jab reduces infection by 94%. The S&P 500, NASDAQ and Dow Jones indexes rose, with the latter touching record highs.
A big bulk of US economic indicators awaits traders on Thursday. Economists expect Gross Domestic Product for the fourth quarter of 2020 to be upgraded from the initial 4% annualized read. Durable Goods Orders also carry expectations for healthy rises while weekly Unemployment Claims are forecast to decrease after the disappointing leap last week.
EUR/USD is testing the resistance level at 1.2175.
EUR/USD is currently testing the nearest resistance level at 1.2175. This resistance level has already been tested many times and proved its strength. RSI remains in the moderate territory, and there is plenty of room to gain additional momentum in case the right catalysts emerge.
If EUR/USD manages to settle above the resistance at 1.2175, it will gain upside momentum and head towards the next resistance level which is located at 1.2220. A similar setup was formed back in December 2020, and EUR/USD managed to gain strong upside momentum once it settled above 1.2175. A move above the resistance at 1.2220 will open the way to the test of the resistance at 1.2250.
On the support side, the nearest support for EUR/USD is located at 1.2155. If EUR/USD declines below this level, it will head towards the 20 EMA which is located at 1.2125. A move below the 20 EMA will lead to the test of the next support level at the 50 EMA at 1.2115.
GBP/USD is trying to get back above the resistance at 1.4150.
GBP/USD received support near 1.4130 and is testing the nearest resistance level at 1.4150. If this test is successful, GBP/USD will move towards the next resistance which is located at 1.4180. A move above 1.4180 will push GBP/USD towards the next resistance level at the recent highs at 1.4240.
I’d note that RSI remains in the extremely overbought territory so the risks of a pullback are high. At the same time, the current upside momentum is strong so GBP/USD will have a good chance to continue its upside move in case the U.S. Dollar Index declines below the support at the 90 level.
On the support side, the nearest support level for GBP/USD has emerged at 1.4130. If GBP/USD settles below this level, it will head towards the next support at 1.4100. A successful test of the support at 1.4100 will push GBP/USD towards the next support at 1.4070.
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