EUR/USD analysis: bearish breakout could result in a test of 1.2100
|EUR/USD Current price: 1.2210
- US business activity and housing sales beat expectations, backing USD yield-triggered rally.
- EUR/USD broke below a major ascendant trend line but remains quite close to it.
The dollar got lifted by a continued rally in Treasury yields and solid business activity data, sending the EUR/USD pair to a fresh April low of 1.2202. Data coming from Europe was quite encouraging also, although by that time of the day, the US 10-year note yield was reaching 3.0% and the market totally ignored it. The preliminary April Markit PMIs were in general above expected all through the region, with the manufacturing sector, however, growing less-than-expected, but above final March's reading. In the US, the Chicago Fed National Activity Index for March fell to 0.10 from 0.98 in the previous month, but Markit PMIs came above expected and above the previous figures, while Existing Home sales soared 1.1% in March, all of which gave the greenback additional support.
European equities managed to end the day with modest gains, while US indexes opened with a positive tone, having hovered around their opening levels all through the day. As for yields, a pullback ahead of the opening take them down to 2.96%, but afterward returned to their highs, keeping the dollar near its highs across the board. This Tuesday, Germany IFO survey is expected to show that confidence shrunk further in the region this month. Also, the US will release some housing data and regional manufacturing indexes that won't affect the greenback negatively in the case of misses, as long as yields keep leading the way.
Technically, the pair has broken below the base of the big symmetrical triangle that contained price since last February, and even completed an intraday pullback to it before resuming its decline, usually a sign of a directional continuation, although with the price a few pips below the ascendant trend line, additional signs are needed to confirm it. In the 4 hours chart, the 20 SMA heads south almost vertically, having crossed below the 100 and 200 SMA, while technical indicators have decelerated their declines, but remain within extreme oversold territory, with the RSI currently at 19. As long as it holds below the 1.2245 level, the downside is favored, with a strong support at 1.2160, and the next at 1.2100. A less likely recovery above 1.2260, on the other hand, could see the pair recovering up to 1.2300.
Support levels: 1.2190 1.2160 1.2125
Resistance levels: 1.2260 1.2300 1.2335
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