EUR/USD: Downside exposed as ECB balance sheet hit new record high

Fed-ECB central bank divergence to hurt the EUR.
Below-forecast German and Eurozone CPIs will likely add to the bearish sentiment around the EUR.

Omkar Godbole FXStreet Contributor

The euro dropped to 1.1816 - the lowest level since Dec. 19 as the as the yield on the 10-year Treasury notes rose to 3.09 percent, the highest since 2011 after upbeat US retail sales figure boosted expectations of faster Fed rate hikes.

The common currency could continue losing altitude in the near future as the ECB and the Fed continue to move in opposite directions. The ECB balance sheet has expanded to a new lifetime high - the total assets rose by another €9.5bn to €4,562.1bn. On the other hand, the Fed is tapering its balance sheet.

Hence, the US-German yield differential could continue to widen further in the USD-positive manner.

As for today, the focus is on the German and Eurozone April consumer price index (CPI) release. A below-forecast reading will only make matters worse for the EUR bulls.

EUR/USD Technical Outlook

The bias remains bearish as indicated by the descending 5-day moving average (MA) and the 10-day MA. However, the 14-day relative strength index (RSI) shows oversold conditions. So, a minor corrective rally could be on the cards.

Support: 1.1790 (76.4% Fib R of Nov-Feb rally), 1.1718 (Dec. 12 low), 1.1669 (June 10 low).

Resistance: 1.1890 (5-day MA), 1.1903 (10-day MA), 1.1961 (Nov. 27 high).

ECB balance sheet size (Source: Reuters)

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

EUR/USD meets initial support around 1.1800

EUR/USD remains on the back foot, although it has managed to reverse the initial strong pullback toward the 1.1800 region and regain some balance, hovering around the 1.1850 zone as the NA session draws to a close on Tuesday. Moving forward, market participants will now shift their attention to the release of the FOMC Minutes and US hard data on Wednesday.

GBP/USD bounces off lows, retargets 1.3550

After bottoming out just below the 1.3500 yardstick, GBP/USD now gathers some fresh bids and advances to the 1.3530-1.3540 band in the latter part of Tuesday’s session. Cable’s recovery comes as the Greenback surrenders part of its advance, although it keeps the bullish bias well in place for the day.

Gold remains offered below $5,000

Gold stays on the defensive on Tuesday, receding to the sub-$5,000 region per troy ounce on the back of the persistent move higher in the Greenback. The precious metal’s decline is also underpinned by the modest uptick in US Treasury yields across the spectrum.

Ethereum Price Forecast: BitMine extends ETH buying streak, says long-term outlook remains positive

Ethereum (ETH) treasury firm BitMine Immersion continued its weekly purchase of the top altcoin last week after acquiring 45,759 ETH.

UK jobs market weakens, bolstering rate cut hopes

In the UK, the latest jobs report made for difficult reading. Nonetheless, this represents yet another reminder for the Bank of England that they need to act swiftly given the collapse in inflation expected over the coming months.

Ripple slides to $1.45 as downside risks surge

Ripple edges lower at the time of writing on Tuesday, from the daily open of $1.48, as headwinds persist across the crypto market. A short-term support is emerging at $1.45, but a buildup of bearish positions could further weaken the derivatives market and prolong the correction.