EUR/USD Forecast: Bears maintain the pressure on yields’ rally

Valeria Bednarik FXStreet

EUR/USD Current Price: 1.1283

German Retail Sales unexpectedly rose 0.6% MoM in November.
US Treasury yields extend their advances on renewed inflation concerns.
EUR/USD is technically bearish and could soon pierce 2021 low at 1.1185.

The American dollar maintains its strength on Tuesday, extending gains against the shared currency. The EUR/USD pair fell to 1.1271, an almost two-week low, ahead of the US open. US Treasury yields keep moving north, with the 10-year note peaking for the day at 1.66%. Asian and European indexes post solid gains, underpinning US futures.

As the coronavirus Omicron strain hits the world, investors speculate the US Federal Reserve will have trouble retrieving financial support as planned. The US central bank is expected to hike rates at least twice this year, with the first hike anticipated for as soon as March, as inflation stands at multi-decade highs. At the same time, speculative interest fears the ongoing wave of coronavirus may disrupt economic progress, forcing the Fed to maintain financial support.

Germany published November Retail Sales, which were up 0.6% MoM, much better than the -0.5% expected. The US session will bring the ISM Manufacturing PMI for December, foreseen at 60.2, and November JOLTS Job Openings.

EUR/USD short-term technical outlook

The EUR/USD pair is in the red for a second consecutive day, approaching the December low at 1.1220. The 2021 low was set at 1.1185, the levels to break to confirm a steeper decline towards the 1.1000 figure. From a technical point of view, the risk is skewed to the downside.

The daily chart shows that the pair stands below a flat 20 SMA, providing intraday dynamic resistance, while the longer ones keep heading lower far above it. Technical indicators head south around their midlines, failing to confirm, at this point, a bearish extension.

In the near term, and according to the 4-hour chart, the bearish case is firmer. The pair has fallen below all of its moving averages, while technical indicators extend their declines within negative levels, maintaining their bearish slopes.

Support levels: 1.1260 1.1220 1.1185

Resistance levels: 1.1305 1.1340 1.1385

View Live Chart for the EUR/USD

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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