EUR/USD: Bears gain strength ahead of German IFO release
|- EUR/USD hit a 7.5-week low in Asia, EUR puts in demand.
- Technicals show scope for a downside break of 1.2150-1.2550 trading range.
- Better-than-expected German IFO readings may save the day for EUR bulls.
The EUR/USD pair fell to 1.2184 in Asia - the lowest level since March 1 and could see a downside break of the 1.2150-1.2550 trading range soon.
Bearish technical setup
The EUR/USD witnessed a downside break of the Bollinger Bands (standard deviation 2). The momentum studies are biased bearish - 5, 10, 20-day moving average (MA) are trending south, indicating a bearish setup. Further, the daily relative strength index (RSI) has turned bearish (fell below 50.00).
US 10-year yield eyes break above 3 percent
The US 10-year treasury yield remains on the hunt for a break above the 3 percent mark. Meanwhile, the European Central Bank (ECB) is seen delaying the QE exit decision. So, the yield differential will likely continue widening in favor of the US dollar in the near future.
Thus, the multiweek trading range of 1.2150-1.2550 could end with a downside break. As of writing, the spot is trading at 1.2208.
The downside break may happen today If the German IFO readings (due at 08:00 GMT) miss estimates. On the other hand, a better-than-expected data could save the day for the EUR bulls.
EUR/USD Technical Levels
A move above 0.2216 (April 6 low) would open up upside towards 1.2284 (5-day MA) and 1.2319 (10-day MA). On the other hand, a daily close below 1.2150 (March 1 low) would confirm a downside break of 1.2150-1.2550 trading range/bearish reversal and could yield a sell-off to 1.2089 (Jan. 4 high) and 1.20 (psychological support + 200-day MA).
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