EUR/USD: Euro extends its losses amid higher US yields
The EUR/USD is trading around $1.2230, as the US Dollar gains more ground across the board. US 10-year yields are touching 3% and the greenback follows. This is driven by optimism about the US economy and upbeat Fed comments.
EUR/USD latest news & analysis
1. Technical Overview
The pair is breaking below the daily ascendant trend line coming from March 1st, and nearing the low set this month with US Nonfarm Payrolls, at 1.2215. Technical readings are clearly bearish but that level needs to give up for bulls to give up. In the 4 hours chart, all of the moving averages are gaining downward strength, although the 20 SMA is crossing below the 200 SMA and nor far from the 100 SMA, with a strong downward angle that also suggests the decline is poised to extend. Below the mentioned 1.2215, the next strong support comes at 1.2160, with a break the level opening the doors for a test of 1.2100 a major static support level. From here, resistances come at 1.2260 and 1.2295 with a recovery above this last favoring additional gains and denying the bearish potential.
EUR/USD PRICE SENTIMENT
EUR/USD BULLISH PERCENTAGE INDEX
We're into a tough spot here with the major pair. The Euro has been trading within a well defined uptrend over the past several months, since breaking out in 2017. However, the market is looking stretched and could also be at risk for a pullback. Here's how how it could play out.
EUR/USD Pivot points
EUR/USD trading positions
2. Fundamental Overview
The EUR/USD pair is on a brink of breaking lower, as the dollar, led by resurgent yields, is the overall winner at the beginning of the week. The yield for the 10-year note touched 3.0% and holds nearby, while commodities and equities extend their latest decline. Yields are overshadowing positive EU data, as the April preliminary Markit PMI came above expected, but remained at the lower end of their recent range. According to the official report, business activity in the region continued to rise at a solid pace, though the rate of expansion remained considerably weaker than seen earlier in the year amid signs of weaker growth of demand and supply constraints. The manufacturing index for the Union resulted at 55.8 down from 55.9 in March and the lowest in 17 months. Services activity improved, with the index reaching its highest in two months with 55.0. The composite index stood unchanged at 55.2.
The US session will bring the preliminary April Markit and official PMI, expected around March final figures, alongside with Existing Home Sales for March. Yields will clearly keep on leading the way, particularly if the data comes in-line with expectations.
EURUSD FUNDAMENTALS TODAY
3. Big Picture
Themes affecting the EUR/USD
Influential Institutions & People for the EUR/USD
The Euro US Dollar can be seriously affected by news or the decisions taken by two main central banks:
The European Central Bank (ECB) is the central bank empowered to manage monetary policy for the Eurozone and maintain price stability, so that the euro’s purchasing power is not eroded by inflation. The ECB aims to ensure that the year-on-year increase in consumer prices is less than, but close to 2% over the medium term. Another of its tasks is the one of controlling the money supply. The European Central Bank’s work is organized via the following decision-making bodies: the Executive Board, the Governing Council and the General Council. Mario Draghi, member of the Executive Board, is also the President of this organism.
On the other
Mario Draghi is member of ECB's Executive Board and also the President of this organism. His declarations are an important source of volatility, especially for the Euro and the currencies traded against it. Born in 1947 in Rome, Italy, he graduated of the Massachusetts Institute of Technology and became President of the European Central Bank in 2011. Draghi gives press conferences in the back of how the ECB observes the current European economy. His comments may determine positive or negative trends for the Euro in the short-term. Usually, a hawkish outlook is seen as positive/bullish for the EUR, while a dovish one is seen as negative/bearish.
Jerome Powell took office as chairman of the Board of Governors of the Federal Reserve System in February 2018, for a four-year term ending in February 2022. His term as a member of the Board of Governors will expire January 31, 2028. Born in Washington D.C., he received a bachelor’s degree in politics from Princeton University in 1975 and earned a law degree from Georgetown University in 1979. Powell served as an assistant secretary and as undersecretary of the Treasury under President George H.W. Bush. He also worked as a lawyer and investment banker in New York City. From 1997 through 2005, Powell was a partner at The Carlyle Group.
ECB NEWS & ANALYSIS
FED NEWS & ANALYSIS
The EUR/USD (or Euro Dollar) currency pair belongs to the group of 'Majors', a way to mention the most important pairs in the world. This group also includes the following currency pairs: GBP/USD, USD/JPY, AUD/USD, USD/CHF, NZD/USD and USD/CAD. The popularity is due to the fact that it gathers two main economies: the European and American (from United States of America) ones. This is a widely traded currency pair where the Euro is the base currency and the US Dollar is the counter currency. Since the EUR/USD pair consists of more than half of all the trading volume worldwide in the Forex Market, it is almost impossible for a gap to appear, let alone a consequent breakaway gap in the opposite direction.
Normally, it is very quiet during the Asian session because economic data that affects the fundamentals of those currencies is released in either the European or U.S. session. Once traders in Europe get to their desks a flurry of activity hits the tape as they start filling customer orders and jockey for positions. At noon activity slows down as traders step out for lunch and then picks back up again as the U.S. comes online. If there is important U.S. data we can expect quiet markets just ahead of the number. U.S. economic news have the ability to either reinforce an existing trend or reverse it depending on by how much it missed or beat expectations with the EUR/USD news. By 5:00 GMT liquidity leaves the market once again as European traders close out positions and head home.
EURUSD 2018 YEARLY FORECAST
The GBP/USD (or Pound Dollar) currency pair belongs to the group of 'Majors', a way to mention the most important pairs worldwide. This group also includes the following currency pairs: EUR/USD, USD/JPY, AUD/USD, USD/CHF, NZD/USD and USD/CAD. The pair is also called 'The Cable', reffering to the first Transatlantic cable that was crossing the Atlantic Ocean in order to connect Great Britain with the United States of America. This term was originated in the mid-19th century and it makes GBP/USD one of the oldest currency pairs in the world.
The popularity of the Pound Dollar is due to the fact that represents two strong economies: British and American (from United States of America). The Cable is a widely observed and traded currency pair where the Pound is the base currency and the US Dollar is the counter currency. After the result of the Brexit referendum, where the majority of the British voted to abandon the European Union, GBP/USD has been suffering some turbulence in the Forex market as a consequence of the associated risks of leaving the single market.
The USD/JPY (or US Dollar Japanese Yen) currency pair is one of the 'Majors', the most important pairs in the world. Japanese Yen has a low interest rate, normally used in carry trades, that's why is one of the most trades currencies worldwide. In the USD/JPY the US Dollar is the base currency and the Japanese Yen is the counter currency. The pair represents American (from United States of America) and Japanese economies.
Trading the USD/JPY currency pair is also known as trading the "ninja" or the "gopher", although this last name is more frequently used when reffered to the GBP/JPY currency pair. The US Dollar Japanese Yen usually has a positive correlation with the following two pairs: USD/CHF and USD/CAD. The nature of this correlation is dued to the fact that both currency pairs also use the US Dollar as the base currency, such as USD/JPY. The value of the pair tends to be affected when the two main central banks of each country, the Bank of Japan (BoJ) and the Federal Reserve Bank (Fed), face serious interest rate differential.