EUR/USD set to lose more ground unless a extremely dovish Fed

EUR/USD has been clinging to 1.19 as tension mounts ahead of the Federal Reserve's decision. A touch of optimism from the Fed may be enough to trigger a new sell-off. Meanwhile, Europe's vaccination issues undermine the common currency, Yohay Elam, an Analyst at FXStreet, reports.

See: EUR/USD to extend its setback to 1.1695 – Credit Suisse

Key quotes

“Powell and the Fed have a tight balancing act – acknowledging the recovery and a potential for higher inflation, without stoking fears of a rapid rate increase. Walking the fine line between worrying about jobs, cheering the expansion, foreseeing a gradual rise in inflation, and putting down fears of an early rate hike is prone to mistakes. That means volatility. It would take only a minor tilt to optimism to push the dollar higher.” 

“The debacle around AstraZeneca's COVID-19 vaccines continues as the old continent is struggling to get jabs into its citizens' arms and even if the crisis is resolved shortly, many European would still refuse this specific inoculation – or perhaps others.”

“The European Medicines Agency is set to announce its verdict on the safety of AZ's immunization on Thursday after cases of blood clots seemed to be correlated with the jabs. Several European leaders hinted that vaccination will likely return. However, a message saying that the benefits of the injections outweigh the risk could do little to alleviate concerns.”

“Support awaits at 1.1870, which was a stepping stone on the way up last week, and that is followed by the 2021 trough of 1.1836.”

“Above 1.1910, the next cap awaits at 1.1950, which held EUR/USD down on Tuesday.”