The EUR/USD dropped to a low of 1.1873 on Wednesday as tax reform talk in the US boosted the treasury yields and the US dollar. The currency pair remained on the back foot in Asia around 1.1880 levels.
Rising channel breached to the downside
Rising channel drawn from June 27 low and Aug 17 low and Aug 2 high and Aug 29 high has been breached to the downside. The technical set up indicates a short-term trend reversal, which is in line with the bearish bias shown by the EUR/USD October expiry options activity.
Still, caution is advised as the bond yield spread has not moved much in favor of the US dollar.
US-German 10-year yield spread
The 10-year yield spread remained flat lined around 178 basis points yesterday. A break above the recent high of 184 basis points [Aug 15 high] would add credence to the bearish breakdown on the price chart.
Eyes US CPI
The US data due today at 12:30 GMT is expected to show the consumer price index [CPI] ticked up in August, in part because of a slight pickup in gasoline prices. Economists believe September's inflation data could be much stronger based on the jump in gasoline prices after Hurricane Harvey.
A better-than-expected CPI could steepen the Treasury yield curve, leading to further losses in the EUR/USD pair.
EUR/USD Outlook
Kathy Lien from BK Asset Management writes, " Eurozone fundamentals have not changed. The ECB is still planning to reduce asset purchases, next month, but it will be difficult for EUR/USD to rise until the dollar stops falling. We still like buying EUR/USD on dips so if you've got tolerance for a stop near 1.17, today's move down to the 20-day SMA would be the a good place to start scaling into a long position.'
FXStreet Chief Analyst Valeria Bednarik says, "failure to regain 1.2000 is certainly discouraging for bulls, and the pair could clearly fall further, although long term the decline continues to look corrective, specially as there's no real background for a dollar rally. A long term ascendant trend line coming from the 1.0600 region, comes today around 1.1795, becoming a critical support, as a break below it will indicate that a steeper correction is under way. In the meantime, and for the short term, the pair is biased lower as in the 4 hours chart, and after failing to surpass its 20 SMA, the pair broke below the 100 SMA, whilst technical indicators maintain their strong downward slopes within negative territory. Last week low at 1.1822 is now the immediate support, en route to the mentioned trend line around 1.1795.
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.
Recommended content
Editors’ Picks
EUR/USD alternates gains with losses near 1.0720 post-US PCE
The bullish tone in the Greenback motivates EUR/USD to maintain its daily range in the low 1.070s in the wake of firmer-than-estimated US inflation data measured by the PCE.
GBP/USD clings to gains just above 1.2500 on US PCE
GBP/USD keeps its uptrend unchanged and navigates the area beyond 1.2500 the figure amidst slight gains in the US Dollar following the release of US inflation tracked by the PCE.
Gold keeps its daily gains near $2,350 following US inflation
Gold prices maintain their constructive bias around $2,350 after US inflation data gauged by the PCE surpassed consensus in March and US yields trade with slight losses following recent peaks.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.