EUR/USD rises above 200-HMA as US two-year yield hits lowest since November 2017


  • EUR/USD has pierced the 200-hour moving average (HMA) resistance.
  • Dovish Fed is weighing over US yields.
  • US two-year yield has hit a 19-month low.

EUR/USD has cleared key resistance and may rise further in the European and US session, tracking the slide in Treasury yields, although bullish reversal may remain elusive as markets are now priced in for Fed rate cuts.

The shared currency found acceptance above the 200-hour moving average of 1.1265 a few minutes before press time and has retraced 50 percent of the drop from 1.1348 to 1.1181.

The rise could be associated with the broad-based US Dollar sell-off triggered by the US Federal Reserve's dovish forward guidance on interest rates and the resulting losses in treasury yields.

The two-year Treasury yield, which tracks short-term interest rate expectations, fell to 1.711% in Asia, the lowest level since Nov. 20, 2017. The yield may extend losses in Europe, helping EUR/USD rise further toward 1.13.

That said, the EUR bulls will likely have a tough time forcing a bull breakout above the recent high of 1.1348, as the money markets are fully priced in for a Fed rate cut in July. Further, the markets have almost priced in another rate cut before the year-end.

The fact that the two-year yield is down 23 basis points on a month-to-date basis and 90 basis points on a year-to-date basis also indicate the markets have largely priced in additional easing. As a result, the upside in EUR/USD looks limited.

The pair's break above the 200-hour MA could be short-lived if gold rally stalls and the American dollar starts recovering ground against China's Yuan.

As of writing, EUR/USD is trading at 1.1270, representing 0.40% gains on the day.

Technical Levels

    1. R3 1.1326
    2. R2 1.129
    3. R1 1.1258
  1. PP 1.1222
    1. S1 1.119
    2. S2 1.1154
    3. S3 1.1122

 

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