EUR/USD: Inverse head-and-shoulders breakout may remain elusive on rising US-DE yield spread


  • The EUR/USD has charted an inverse head-and-shoulders pattern with a neckline hurdle at 1.1713.
  • The pair may have a hard time scaling the neckline resistance, courtesy of the widening two-year and 10-year US-DE (Germany) yield spread.

The daily chart of the EUR/USD is flashing a bullish reversal pattern, but a breakout may remain elusive, as the bond yield differentials are rising in the EUR-negative manner.

At press time, the EUR/USD is trading at 1.1672 and the inverse head-and-shoulders neckline is located at 1.1713. A close above that level would imply that sell-off from the February high of 1.2556 has ended and the bulls have regained control.

However,  it is easier said than done, as the spread between the US and German bond yields are rising in favor of the EUR/USD bears.

For instance, the 10-year yield spread currently stands at 257 basis points - the highest level since Aug. 8. More importantly, the two-year spread, which is more sensitive to interest rate expectations, is hovering at 233 basis points - the highest level since 1989.

The currency pair may find acceptance above the inverse head-and-shoulders neckline if US-DE yield differential drops sharply, although the odds of the spread rising further are high, as the Fed is expected to raise rates next week. The EUR could also pick up a bid if the Chinese yuan posts big gains against the USD.

EUR/USD Technical Levels

Resistance: 1.1713 (inverse head-and-shoulders neckline), 1.1791 (July 9 high), 1.1852 (June 14 high)

Support: 1.1666 (200-day moving average), 1.1605 (50-day moving average), 1.1526 (Sept. 10 low)

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.

Feed news

Latest Forex News


Latest Forex News

Editors’ Picks

EUR/USD climbs above 1.1250 as investors eye coronavirus headlines

EUR/USD preserved its recovery momentum early Friday and rose above 1.1250 during the European trading hours. Markets are doubting the Fed's policy tightening prospects as the new coronavirus variant revives concerns over the economic recovery losing steam.

EUR/USD News

GBP/USD rebounds toward mid-1.3300s on broad dollar weakness

GBP/USD reversed its direction after dipping below 1.3300 earlier in the day and started to push higher toward 1.3350. The greenback is facing heavy selling pressure amid the sharp decline witnessed in the 10-year US Treasury bond yield.

GBP/USD News

Gold clings to strong gains above $1,800 as US T-bond yields plunge Premium

Gold staged a decisive rebound on Friday and reclaimed $1,800. The intense flight to safety is causing US Treasury bond yields to fall sharply and fueling XAU/USD's rally. Investors await news on vaccines' effectiveness against the new COVID variant.

Gold News

Cardano could tank to $1 if ADA fails to defend crucial support

Cardano price is currently hovering below a freshly shattered 6-hour demand zone, ranging from $1.68 to $1.79. This resulting crash could extend to the immediate and critical foothold at $1.40. 

Read more

Black Friday 2021 Discounts!

Do you want to take your trading skills to the next level? Now you have a chance of leaping forward at attractive introductory rates. For Black Friday, FXStreet is offering discounts of up to 50% on its upgraded Premium plans. 

Subscribe now!

Forex MAJORS

Cryptocurrencies

Signatures