EUR/USD: Bulls need a convincing break above 1.17
|- Repeated rejection above 1.17 is a cause for concern for the EUR bulls.
- A combination of increased risk appetite and a pullback in the treasury yields could yield much-needed break above 1.17.
For EUR/USD, 1.17 holds the key to the continuation of the bull run from the Aug. 15 low of 1.1301.
At press time, the pair is trading at 1.1684, having faced rejection above 1.17 three times in the last four trading days. As a result, the immediate bullish outlook is likely neutralized.
The failure to scale the psychological level of 1.17 in a convincing manner is likely associated with the rising Treasury yields and the widening US-De (German) two-year yield spread. As of writing, the 10-year treasury yield is trading 3.06 percent, having clocked a two-month high of 3.10 percent yesterday. Meanwhile, the two-year US-DE (German) yield spread is seen at 333 basis points, the highest level since 1989.
The common currency could find acceptance above 1.17 if the spread rolls over in favor of the bears. That could happen in the next day or two as the 10-year treasury yield created a doji candle yesterday, signaling a bullish exhaustion.
Further, the AUD/JPY and NZD/JPY are looking north, indicating easing concerns about the trade war. As a result, the equity markets could pick up a bid and help the EUR/USD secure a daily close above 1.17.
However, if the 10-year treasury yield continues to rise, then a close above 1.17 will likely remain elusive.
EUR/USD Technical Levels
Resistance: 1.1724 (Sept. 18 high), 1.1791 (July 9 high), 1.1852 (June 14 high)
Support: 1.1664 (5-day moving average), 1.1640 (200-hour moving average), 1.16 (psychological support)
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