Will EUR/USD cut through H&S neckline hurdle?
|- EUR/USD is yet to take out the H&S neckline hurdle.
- Further flattening of the treasury yield curve could help EUR/USD rally to 1.1750 levels.
The EUR/USD pair was well bid in Asia on the back of broad based USD selling, but still failed to cut through the head and shoulders neckline hurdle of 1.1671.
The key technical hurdle may fall in Europe/US if the treasury yield curve (spread between the 10-year yield and the 2-year yield) continues to narrow. As of now, the spread 75 basis points (bps). A drop below the Oct. low of 74.80 bps may yield another leg lower in the US dollar.
EUR/USD may also find bids via a potential EUR/GBP rally following a (potential) dovish rate hike by the BOE.
As discussed here, the EUR/USD Nov. expiry options data published by the CME shows that the investors have positioned for a corrective rally above 1.1750-1.18 handle.
However, the USD is still seen rallying on Powell-led Fed and tax reform talk. Kathy Lien from BK Asset Management wires, " Many sources are also saying that Jerome Powell will be President Trump's pick for Fed Chair. As the market has fully discounted a Yellen departure, as long as Trump picks Powell or Taylor and not someone from left field, the dollar will rise as the uncertainty recedes. The announcement is expected on Thursday along with the Republicans' tax reform bill, which was delayed from today. Unless there are any unexpected surprises on either front, the dollar should rise on these announcements."
EUR/USD Technical Levels
FXStreet Chief Analyst Valeria Bednarik writes - "Technically, the pair is gaining bearish strength short-term, as it is closing the day below the 1.1630 price zone, where it has the 23.6% retracement of its latest daily decline, and its 20 SMA in the 4 hours chart. Technical indicators in the mentioned time frame head lower within bearish territory, with the price now posed to test October low of 1.1575, below the level, there's little in the way towards 1.1460, the strong static resistance that capped advances all through 2015 and 2016. Nevertheless, further dollar's gains will depend on how the market takes Trump's announcement."
Support levels: 1.1575 1.1540 1.1500
Resistance levels: 1.1670 1.1700 1.1745
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