EUR/USD Analysis: Increased odds of a drop to 1.20

Technicals favor a drop to the psychological support of 1.20.
No fireworks expected from the ECB, hence yield spread will likely continue to rise in the EUR-negative manner.
Options market shows increased demand for the EUR puts.

Omkar Godbole FXStreet Contributor

Daily chart

The pair breached the ascending trendline (drawn from the April 2017 low and November 2017 low) in a convincing manner on April 20, signaling long-term bullish invalidation. Further, a downside break of the pennant pattern confirmed on April 23, has boosted the odds of a bearish breakdown of 1.2150-1.2550 trading range. The 5, 10, 21MA are biased bearish (sloping downwards) and the relative strength index (RSI) has dipped below 50.00 (bearish territory).

Weekly chart

The bearish RSI divergence and a downside break of the pennant suggest scope for a further decline in the EUR/USD. The 5-week MA and the 10-week MA are biased bearish.

And last but not the least, the spread between the 10-year US treasury yield and the German 10-year bond yield stands at 236.8 basis points - the highest level since 1989 and could rise further in the EUR-negative manner as the 10-year treasury yield looks set to scale the 3 percent mark in a convincing manner.

Read:

Increased demand for EUR puts (bearish bets)

ECB Preview: no fireworks expected this Thursday - Barclays

View

EUR/USD looks set to test 1.20 (psychological support + 200-day MA) in a week or two. A break below that level would trigger stops on positional longs and hence could set the tone for a deeper and faster sell-off to 1.1709 (38.2 percent Fibonacci retracement of 1.0341-1.2556).

On the higher side, only a daily close above the 10-day MA would abort the bearish view.

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

AUD/USD rises to 0.6950 as USD slips on Fed's Warsh

AUD/USD regains traction and extends the bounce toward 0.6950 in the Asian session on Friday. Fed Chair Warsh's comments reinforce the selling pressure on the US Dollar, allowing the pair to stretch higher. Warsh said that he remains committed to delivering price stability without giving away anything on future interest rate path.

USD/JPY falls in symc with USD, gives up 158.00 after Warsh's speech

USD/JPY has come under fresh selling pressure and gives up 158.00 in the Asian session on Friday amid the emergence of fresh US Dollar selling. Fed Chair Warsh's non-committal commentary on the future tightening path, weighs on the US Dollar and the pair.

Gold looks vacillating above $4,150

Gold alternates gains with losses below the key $4,200 mark per troy ounce on Friday. The yellow metal’s irresolute price action comes in response to a modest pullback in the US Dollar and a tepid recovery in US Treasury yields across the board.

Bitcoin steadies at $82,000: The five forces crushing the Uptober rally

Crypto markets have remained under pressure so far in October, with Bitcoin (BTC) sliding below $80,000 earlier this week before recovering to around $82,000 on Friday, as macroeconomic headwinds and cooling demand weigh on the market.

The Fed just got a second hot inflation number. Here's what the diesel signal is really saying

The Federal Reserve (Fed) faces a renewed inflation challenge after two consecutive reports showed price pressure intensifying across the US economy. September's Consumer Price Index (CPI) confirmed accelerating consumer inflation, while the Producer Price Index (PPI) revealed an even sharper rise in business costs. Behind both reports lies a common factor: energy prices.

Everyone's dumping Gold after hot US inflation. Here's why $4,100 could be a floor, not a cliff

Gold (XAU/USD) is recovering from a sharp sell-off triggered by hotter-than-expected United States (US) inflation data released on Wednesday. The precious metal briefly plunged toward $4,073 as investors increased their bets on further Federal Reserve (Fed) interest rate hikes before recovering as US Treasury yields and the US Dollar (USD) reversed their initial gains.