EUR/USD Price Analysis: Bears take the Day-2 bulls to the cleaners

The euro has come under pressure following a resurgence in the US dollar on Wednesday. The US dollar index, DXY, was last seen up 1% at 111.20 but it had been as high as 111.735.  A tear in US yields has helped to prop up the US dollar as the money markets to price out overall optimistic speculation over a Federal Reserve pivot. The yield on the US 10-year note was up a high of 3.78%. 

The following illustrates the price action across the assets resulting in the sell-off in the euro and offers scenarios for the rest of the week leading to the Nonfarm Payrolls event on Friday. 

US yields

US dollar

The greenback, as measured by the DXY index, has consequently rallied on the day but corrected into a support that would be expected to see the index extend the bullish correction and move in on the 112 level. 

However, should the index's support crumble, the euro will start to correct the recent sell-off significantly:

EUR/USD weekly template

The price has followed a 1,2,3 day count and has potentially put in a high for the week at resistance, as illustrated on the chart above. The price broke out of the front side of the trendline support on day 2 and crumbled on day 3 putting in a peak formation in Asia following two days of rising from the low of the week, so far.  

EUR/USD H1, zoomed

We are waiting for this week's Nonfarm Payrolls, NFP, on Friday, but the price action is teeing up a move higher given the low's pin and the hourly W-formation that has formed. A restest into the neckline, or close to it, can be expected and is already underway. Thereafter, the bulls could be encouraged for a move up towards 0.9920 with the price creeping out of the front side of the trendline resistance. 

If, on the other hand, the bears stay the course, on a break of 0.9800, we will be looking at a move towards the week's lows at 0.9752: