- EUR/USD trades close to the critical Fibonacci support at 1.1945.
- Dollar rises, stocks drop as Powell refrains from jawboning yields.
- A big miss on US payrolls is needed to avert a bigger drop.
EUR/USD nearly tested a widely-tracked Fibonacci retracement level in Asia and is trading flat while heading into the London open.
The pair closed in on 1.1945 – the 23.% Fibonacci retracement of the rally from the early November low of 1.0636 to Jan. 6 high of 1.2349.
Selling pressure ran out of steam near that level four weeks ago, allowing the bulls to lift the pair back to above 1.22.
The support, however, could be breached this time, as the Federal Reserve President Jerome Powell expressed little concerns about rising bond yields on Thursday, paving the way for the Treasury market to find the "right level" in yields.
The right level in the 10-year yield could be much higher than the current 12-month high of 1.58%, as the copper-gold ratio, a barometer of global growth, continues to rise.
In other words, the yield-led risk-off in stocks seen at press time could worsen, leading to a stronger haven demand for the dollar and deeper losses for EUR/USD.
The downside will likely gather pace if the German Factory Orders data for January due at 07:00 GMT on Friday prints below estimates.
Later the focus would shift to the US Nonfarm Payrolls for February. A big miss on expectations is needed to apply brakes on the rally in yields and put a floor under EUR/USD.
The pair is currently trading unchanged on the day near 1.1960, representing a 0.90% decline on the week.
Also read: US Nonfarm Payrolls February Preview: The inflection point
Technical levels
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