The EUR/USD pair suffered another day of sharp losses on Tuesday and tumbled to fresh yearly lows amid a follow-through US Dollar upsurge. Rallying US Treasury bond yields, with the 10-year note shooting above the psychologically important 3% level to hit its highest level since 2011, was seen as one of the key factors behind the greenback's strong move on Tuesday. Traders paid little attention to the mixed US economic data, instead followed bond yield dynamics.
The release of better-than-expected Empire State manufacturing index and a second straight month of growth in the US monthly retail sales suggested that the economy is picking up pace after a slow start to the year. Improving economic indicators revived expectations that the Fed might need to raise interest rates more aggressively and remained supportive of the prevailing bullish sentiment surrounding the buck.
The pair now seems to have entered a bearish consolidation phase and was seen oscillating in 15-20 pips narrow trading range through the Asian session on Wednesday. Moving ahead, today's release of final German/composite EZ CPI print, along with the ECB President Mario Draghi's scheduled speech would now be looked upon for some immediate respite for the EUR bulls. From the US, housing market data and speech by Atlanta Fed President Raphael Bostic might influence the US price-actions and eventually produce some short-term trading opportunities.
From a technical perspective, this week’s failure near the key 1.20 psychological mark and a subsequent sharp slide clearly indicate that the near-term bearish trajectory might still be far from over. Hence, the pair seems more likely to break below the 1.1800 handle and head towards testing its next major support near the 1.1740-30 region, representing 38.2% Fibonacci retracement level of the pair’s multi-year decline from May 2014 highs (1.3991) to lows touched in Jan. 2017 (1.0341).
On the flip side, recovery attempts back above mid-1.1800s might now confront fresh supply near the 1.1900 handle and any subsequent up-move seems more likely to be capped near the 1.1935-40 region.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold struggles to hold above $2,350 following US inflation
Gold turned south and declined toward $2,340, erasing a large portion of its daily gains, as the USD benefited from PCE inflation data. The benchmark 10-year US yield, however, stays in negative territory and helps XAU/USD limit its losses.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.