EUR/USD Forecast: Cooling yields weigh on the greenback

Valeria Bednarik FXStreet

EUR/USD Current Price: 1.2086

US Treasury yields ticked lower, frenzy seems over for now.
The focus shifts to the services sector, with updates on EU and US PMIs.
EUR/USD in recovery mode but below the 1.2100 level.

Dollar buyers paused in the latest American session, helping EUR/USD recover from a fresh weekly low of 1.1991. European indexes posted modest gains but failed to support Wall Street, as US indexes edged lower. Meanwhile, US Treasury yields ticked lower, holding within familiar levels, as investors brace for positive economic hints.

European data disappointed, as German Retail Sales fell by 4.5% MoM in January, while the year-on-year comparison came in at -8.7%. European inflation was up by 0.9% YoY in February, according to preliminary estimates, missing the market’s expectations. The absence of inflationary pressures may have helped cooling government bond yields. The US published the February ISM-NY Business Conditions Index, which contracted to 35.5 from 51.2, and March IBD/TIPP Economic Optimism printed at 55.4 from 51.9 in the previous month.

This Wednesday, Markit will publish the final versions of its February Services PMIs for the EU and the US. The services sector is the most hit by the pandemic, and downward revisions shouldn’t surprise. The US will release the official ISM Services PMI, foreseen stable at 58.7.

EUR/USD short-term technical outlook

The EUR/USD pair trades at daily highs a few pips below the 1.2100 level, but despite the roughly 100 pips comeback, the bullish potential seems limited. In the 4-hour chart, the pair is struggling around a firmly bearish 20 SMA, unable to advance beyond it. Technical indicators have recovered from oversold levels but lost bullish strength below their midlines. The advance could continue if the pair manages to extend the current advance beyond 1.2120, the immediate resistance level.

Support levels: 1.2060 1.2015 1.1970

Resistance levels: 1.2120 1.2170 1.2215

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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