EUR/USD Forecast: Powell punched the euro to critical support, NFP set to push it over the line

"Caught my attention" – is the only comment the world's most powerful central banker has had to say about rising US bond yields that markets are worried about, triggering a market selloff and a dollar bull run. Federal Reserve Chair Jerome Powell has committed to supporting the recovering economy, dismissed inflation concerns and remains that ten million Americans are out of work. By sticking to the script, he stuck it to markets. 

The Fed now enters its "blackout period" ahead of the March 17 rate decision, but markets are anything but quiet. Returns on ten-year Treasuries have topped 1.55% and EUR/USD is hovering around its 2021 lows of 1.1950. 

See Powell Analysis: Markets set to suffer for two more weeks as Fed mostly dismissed bond rout

Investors have little time to digest Powell's punch as they soon have to grapple with February's Nonfarm Payrolls report. The economic calendar is pointing to an increase of 182,000 jobs in the world's largest economy, a relatively modest pace – which could be lower according to leading indicators. Both the ADP report and the ISM Services Purchasing Managers' Index missed estimates. 

On the other hand, the ISM MAnufacturing PMI beat estimates and Goldman Sachs, a bank, foresees 250,000 positions gained. 

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The main upside drivers for yields and the dollar are vaccines and stimulus. On the medical front, America has hit a pace of two million inoculations per day, increasing the bringing forward the timeline for exiting the crisis.

In Congress, Senate Republicans have slowed the process of approving the new version of President Joe Biden's covid relief package by forcing clerks to read it out loud. However, Democrats have united around a modified version and are set to turn the bill into law sometime next week. 

All in all, the dollar has reasons to rise. What about the old continent? While German Factory Orders beat estimates with an increase of 1.4% in January, the EU's vaccination campaign continues at a sluggish pace. Italy's decision to block the sending of jabs to Australia reflects despair rather than strength. 

Overall, the NFP and stimulus may give the greenback another boost after Powell's powerful impact. 

EUR/USD Technical Analysis

Euro/dollar is trading close to the critical 1.1950 trough – and has been forming a double-bottom there. It last hit that level in early February, a line which serves as the 2021 trough. Will it continue lower? The Relative Strength Index on the four-hour chart is just around 30 – about to enter oversold territory. On the other hand, downside momentum has strengthened and the pair is trading below the 50, 100 and 200 Simple Moving Averages. 

Below 1.1950, further support awaits at 1.1930, followed by 1.1880 and 1.1850 – which all played a role in December 2020. 

Resistance awaits at 1.1990, which was a swing low earlier in the week, and then by 1.2020, a bottom recorded in late February. The next lines to watch are 1.2050 and 1.2110. 

Where next for the dollar as the Fed refocuses, bonds bring action, jobs set to cause jitters