The greenback comeback is alive and kicking. The EUR/USD pair has already dropped some 60 pips from the peak of 1.2222, and more may be in store. A US bond auction and Fed speakers hold the key to the next moves, Yohay Elam, an Analyst at FXStreet, reports.

See – EUR/USD to peak around 1.25-1.27 during the first half of 2021 – Nordea

Key quotes

“The US currency dived on Tuesday after investors rushed to buy ten-year Treasuries. The consequent fall in yields triggered the downfall – making Wednesday's 30-year auction more important than usual. High demand could weigh on the greenback, but long-term debt could attract less enthusiasm.” 

“Federal Reserve Governor Lael Brainard and Vice-Chairman Richard Claudia will both speak later in the day. If they mention tapering – even by denying it – the dollar has room to advance. Fewer dollars printed mean higher yields and a stronger dollar.”

“Two weeks before the Fed announces its rate decision, it publishes a document consisting of anecdotal reports from its regions. If the report – usually a low key event – includes optimism about fiscal stimulus and the vaccine, it would also boost the greenback.”

“Critical support awaits at 1.2125 – the triple-bottom initially tackled in mid-December and tackled in recent days. There are several support lines below, but these are weaker – 1.21, 1.2075, 1.2160 and 1.2040.” 

“Some resistance awaits at 1.2180, which temporarily capped EUR/USD on Tuesday. It is followed by 1.2222, the recent high, followed by 1.2240, which provided support last week.”