EUR/USD: Upside favored after bullish inside day, but US yields may play spoilsport

EUR/USD is looking north, having carved out a bullish candlestick pattern on Monday, but the upside could be capped by expectations for a hawkish Federal Reserve (Fed) rate cut and a rise in the US Treasury yields.

The currency pair ended 0.19% higher on Monday. Further, the high and low fell within Friday's trading range. Essentially, the common currency charted a bullish inside day candle on Monday, aborting the pullback from the recent highs near 1.1180 and shifting risk in favor of a rise back to that level.

Put simply, the candlestick arrangement is biased bullish. The gains, however, could be muted or remain elusive as the Fed is expected to deliver a 25 basis point rate cut on Wednesday and downplay the need for additional near term easing.

The US Treasury yields, therefore, may rise while heading into the Fed rate decision, keeping the US Dollar better bid. In fact, the 10-year yield has already added 14 basis points over the last three days.

As of writing, the yield is seen at 1.85% and the EUR/USD pair is trading largely unchanged on the day near 1.11.

Apart from US yields, the common currency could take cues from German Bundesbank President Weidmann's speech at 09:50 GMT and the US housing data and consumer confidence number scheduled for release at 14:00 GMT.

Technical levels