EUR/USD - Breakout traders eye Fed speak, Brexit talks & Treasury yields

The 4-hour chart of the EUR/USD pair clearly shows the spot is trading in the sideways range/channel of 1.1290-1.1135. Breakout traders await a convincing break above/below the channel resistance/support of 1.1290/1.1135.

The currency pair came close to breaching the channel on the downside in Asia, but slightly dovish comments from Fed’s Evans saved the day for the common currency. The spot was last seen trading around 1.1150 levels.

Eyes Fed Speak

Fed’s Stanley Fischer speech is due at 12:00 GMT, while Fed’s Kaplan speech is scheduled at 19:00 GMT. Both policymakers are likely to defend the last week’s hawkish Fed rate hike and support the plan to begin trimming the balance sheet size later this year. A downside break in the EUR/USD looks likely if the 10-year treasury yields react positively to hawkish comments from Fischer and Kaplan.

The journey back to the channel resistance may gather pace if the policymakers talk about weak inflation and a delay in the next rate hike until December.

Brexit talks

Brexit talks got off to a positive start on Monday with the EU gaining a slight upper hand on the first day of the negotiations. The UK appears to have conceded to the EU's preferred order for the talks, which will mean trade negotiations do not begin immediately. As talks continue, traders should note that an aggressive posture from either side could weigh over their respective currencies.

US 10-year yield remains below 200-DMA

Though Monday’s gains were encouraging, the 10-year treasury yield is still below 200-DMA of 2.205%. The EUR/USD may break the range to the downside in a convincing manner if the 10-year yield breaks above its 200-DMA.

EUR/USD Technical Levels

As per the measured height method, a downside break of the trading range would open doors for 1.0980. On the way lower, the bears would have to chew through demand around support at 1.1128 (4-hour 200-MA), 1.1075 (May 18 low) and 1.1022 (50-DMA).

An upside break of the range would mean a potential for a rally to 1.1445. On the way higher, resistance is seen at 1.1166 (June 9 high), 1.1208 (rising trend line hurdle), 1.1268 (May 23 high).

Note - The daily is close to being bearish. A downside break in the EUR/USD would push the RSI well into the bearish territory.  On the 4-hour chart, we have a bearish 50-MA and 100-MA crossover.

  TREND INDEX OB/OS INDEX VOLATILY INDEX
15M Bearish Overbought Expanding
1H Bullish Neutral Low
4H Bearish Neutral Low
1D Bullish Neutral Expanding
1W Slightly Bullish Overbought High

 

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