The EUR/USD pair dropped on Monday after a strong US ISM data pushed the treasury yields higher. The spot closed at 1.1363 levels. Monday’s weak close adds credence to Friday’s bearish hammer like pattern and signals the bull market has ended at least for the short-term.
Along with the spike in the Treasury yields, what weighed on the EUR was also the bearish price RSI divergence on the 4-hour chart.
Buy the dip?
The retreat from the last week’s high of 1.1446 looks more like a technical pullback. Last week’s rally was largely based on the speculation that the ECB might hike rates or begin QE taper earlier than expected. However, as explained here yesterday, the ECB rate hike talk looks overdone. Moreover, the Fed is still the most hawkish central bank out there. Thus, strong dip demand is unlikely this week, unless Friday’s US wage growth numbers are horrible.
Sell the rip?
The Fed is expected to raise rates by another 25 basis points this year. The speculation is on the rise that it would begin the balance sheet reduction in September. Treasury yield posted solid gains on Monday as well. The 2-year yield closed in on the highest level since 2008. Meanwhile, as said earlier, the ECB premature tightening talk looks overdone. Hence, upticks could be met with fresh offers, unless Friday’s US wage growth figures put a question mark on Fed’s plans to tighten policy at a faster pace.
The data docket is light today with US closed on account of the Independence day holiday. One can expect lackluster trading amid thin volumes.
EUR/USD Technical Levels
The spot was flat lined in Asia around 1.1365 levels. A break below 1.1339 (support offered by the trend line sloping upwards from Apr 17 low and May 11 low) would expose 1.1284 (former resistance turned support). Only a daily close below the same would signal the pair has topped out. The next major support is seen at 1.1224 (4-hour 200-MA).
On the higher side, break above 1.1387 (4-hour 10-MA) would open up upside towards 1.1446 (last week’s high). A daily close above the same would open doors for a sustained rally to 1.15.
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 nears 1.0800 on broad US Dollar weakness
Optimism continues to undermine demand for the American currency ahead of the weekly close. EUR/USD hovers around weekly highs just ahead of the 1.0900 figure.
GBP/USD reconquers 1.2500 with upbeat UK GDP
Following BOE-inspired slump on Thursday, the British Pound changed course and trades around 1.2530. Better-than-anticipated UK GDP and a weaker USD behind the advance.
Gold resumes advance and trades above $2,370
XAU/USD accelerated its recovery on Friday, as investors drop the USD. Dismal US employment-related figures revived hopes for a soon-to-come rate cut from the Fed.
XRP tests support at $0.50 as Ripple joins alliance to work on blockchain recovery
XRP trades around $0.5174 early on Friday, wiping out gains from earlier in the week, as Ripple announced it has joined an alliance to support digital asset recovery alongside Hedera and the Algorand Foundation.
Euro area annual inflation is expected to be 2.4% in April 2024
Euro area annual inflation is expected to be 2.4% in April 2024, stable compared to March. Looking at the main components of euro area inflation, services is expected to have the highest annual rate in April.