FX.co ★ Outlook for EUR/USD. Biden's speech may push USD higher

The euro/dollar pair continues falling. The price dropped to the 17th figure amid the statistical data for the first time since last November. In fact, macroeconomic reports only intensify the already bearish market sentiment. According to the current fundamental analysis, the US dollar is becoming stronger against the euro. The published data only proved the uptrend. It seems that this week, the pair may fix between the levels of 1.1600-1.1790 (the upper limit of the Kumo cloud – the lower line of the Bollinger Bands indicator on D1). Moreover, if during the press conference, Joe Biden announces a new $3-trillion economic plan, the price is likely to hit the 16th figure by the end of the week.

Today's jump was mainly caused by the US macroeconomic reports. The US published its final data on the GDP for the fourth quarter. The reading was upwardly revised to 4.3% from 4.0%. Notably, the initial estimates unveiled a rise to 4.3%.

However, the preliminary data did not meet the forecasts. As a result, the US dollar remained under pressure. In fact, in the fourth quarter, most components failed to reach forecasts. Thus, the personal consumption index climbed by 2.3% instead of a rise of 2.4%. The GDP price index increased by 2.0%, whereas economists had expected a rise of 2.1%. At the same time, the core PCI index, one of the most monitored indicators by the US Fed, inched up by 1.3%, whereas the forecast was 1.4%. The fact that the general indicator was upwardly revised (the preliminary estimates met the final data) supported the US dollar. All other inconsistencies were ignored by market participants. Importantly, during its March meeting, the regulator upwardly revised the US GDP forecast for 2021 (from 4.2% to 6.5%).

The US labor market also supported the greenback. The number of the first-time unemployment claims jumped by 684 thousand in the given period. On the one hand, it is a big rise compared to the pre-crisis readings. However, the current result is the lowest since March 2020 when the pandemic began. Before last spring, the indicator was hovering between 200-250 thousand. However, since March, it has not fallen below 700 thousand. That is why the current reading is really positive. Notably, according to the recent data, the US non-farm payrolls advanced by 379 thousand (forecast: +117 thousand), whereas the US private sector expanded by 420 thousand (forecast: +210 thousand). At the same time, the US unemployment rate dropped to 6.2%, whereas economists had expected a rise to 6.5%. That is why the US non-farm payrolls may enter the green zone. Notably, the above-mentioned reports form only a minor reason for the continuation of the uptrend.

The US dollar is rising ahead of Joe Biden's speech. He may announce a large-scale financial plan that is under consideration in the White House. In the US press, there is information that Joe Biden will not limit financial support by the recently adopted $1.9 trillion package. According to The Washington Post, the new stimulus package could be worth $3 trillion. These funds are planned to be used, in particular, to create jobs, modernize infrastructure as well as develop industry and free education in municipal colleges. The legislative package also implies an increase in taxes primarily for wealthy citizens and large corporations. Biden intends to increase the corporate tax (from 21% to 28%), cancel tax benefits for limited liability companies, and increase income tax for those US citizens whose annual income exceeds $400 thousands. Yesterday, Treasury Secretary Janet Yellen indirectly confirmed the existence of such plans. She promised to present a new plan to support the economy in the near future. She also added that the change in tax policy would allow them to invest in infrastructure.

If Biden confirms the White House's intention to introduce a new stimulus package, the US dollar will receive a strong and long-lasting stimulus for a further rise. It is obvious that such stimuli will allow the US economy to advance by 8% (forecast provided by experts at Goldman Sachs) instead of 6.5% as the Fed expects.

To sum up, we can say that Joe Biden's speech will strengthen the upward trend of the euro/dollar pair. Other fundamental factors will also support the greenback. Thus, traders are recommended to open short positions with the target of 1.1630. The pair has not dropped below this low since last September. The next resistance level is located at 1.1600 that is the upper limit of the Kumo cloud on the weekly chart.