EUR/USD erases early losses as US yield rally stalls


  • EUR/USD trades flat after hitting lows below 1.12140 in Asia. 
  • The US yield pulled back from 12-month high, weakening demand for the greenback. 
  • Copper-gold ratio suggests scope for an extended rally in bond yields. 

After falling to 1.2137 in Asia, EUR/USD has now regained poise to trade largely unchanged on the day near 1.2160. 

The bounce could be attributed to the 10-year US Treasury yield's pullback to 1.50% from the 12-month high of 1.55% reached Thursday. 

The relief, however, could be short-lived, as the copper-gold ratio, an indicator of global growth, suggests the yield has plenty of room to rise, as noted by Jeroen Blokland, Portfolio Manager for the Robeco Multi-Asset funds. 

The uptrend in yields will likely gather pace, bringing more pain for stocks and EUR/USD if the US core personal consumption expenditures price index (PCE) scheduled for release at 13:30 GMT beats estimates. Federal Reserve's preferred measure of inflation is expected to have risen by 0.2% month-on-month in January, following December's 0.3% increase. 

However, the dollar may have a tough time holding on to gains for the long haul if the short-duration bond yields remain relatively low, according to Goldman Sachs. While the 10-year Treasury yield has risen by nearly 50% this year, the two-year yield, which is more sensitive to short-term interest rate/inflation expectations, has added just four basis points. 

The investment banking giant expects coronavirus vaccinations and rapid global growth to keep the greenback under pressure. 

EUR/USD faced rejection at 1.2243 on Thursday and ended the day with a Gravestone Doji candle on the daily chart, warning an impending sell-off. The dollar found haven bids as the steep rise in the US Treasury yields weighed over stock markets. 

Technical levels

EUR/USD

Overview
Today last price 1.2156
Today Daily Change -0.0007
Today Daily Change % -0.06
Today daily open 1.2163
 
Trends
Daily SMA20 1.2097
Daily SMA50 1.2153
Daily SMA100 1.2023
Daily SMA200 1.179
 
Levels
Previous Daily High 1.2243
Previous Daily Low 1.2156
Previous Weekly High 1.217
Previous Weekly Low 1.2023
Previous Monthly High 1.235
Previous Monthly Low 1.2054
Daily Fibonacci 38.2% 1.2189
Daily Fibonacci 61.8% 1.221
Daily Pivot Point S1 1.2132
Daily Pivot Point S2 1.21
Daily Pivot Point S3 1.2045
Daily Pivot Point R1 1.2219
Daily Pivot Point R2 1.2274
Daily Pivot Point R3 1.2306

 

 

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