By the end of trading on Thursday, the EUR/USD pair closed down. In the second half of the day, the euro rate came under pressure from a sharp rise in Treasury bond yields. This rise came after comments from US president Donald Trump saying that he intended to announce some changes to the tax system in the next few weeks. He made this announcement during a meeting with airline executives. The dollar rose across the board on this news, and the euro fell from 1.0694 to 1.0651.
In Asia, the EUR/USD pair is trading at 1.0662 and has been consolidating at this level for 11 hours. 10-year and 30-year US bond yields are trading in positive territory, which is preventing the euro from strengthening against the US dollar.
The Euro Currency Index is growing and currently stands at 99.52 points. This means that the euro is strengthening on most of the crosses. The euro showed some moderate growth yesterday against the Swiss franc and the Japanese yen. Traders in Asia are now trying to induce an upwards movement of the euro against both the Australian dollar and the British pound.
As I've already stated above, the growth in US bond yields is holding up growth of the euro against the US dollar. For 10-year bonds, there is an immediate resistance at 2.4277%. I think that from here, yields will start to fall. Correspondingly, I expect the euro to fall to 1.0640, and after a reversal, some upwards movement to around 1.0702. I only doubt that buyers will be able to break through the trend line at 1.0679 on the first attempt.
Day's news (GMT 3):
- 12:30 UK: industrial production (Dec), manufacturing production (Dec), trade balance (Dec);
- 16:30 Canada: net change in employment (Jan), unemployment rate (Jan);
- 18:00 UK: NIESR GDP estimate (Nov - Jan);
- 18:00 USA: Michigan Consumer Sentiment Index and preliminary inflation projections (Feb);
- 22:00 USA: monthly budget statement (Jan).
EURUSD rate on the hourly. Source: TradingView
Intraday forecast: low: 1.0638, high: 1.0702, close: 1.0680.
Trump's announcement yesterday stopped the euro from returning above 1.0700. US bond yields rose sharply. By the end of the day, the pair had slid to 1.0651. It's worth noting that the rate stayed within the range of the daily hammer that formed, between 1.0641 and 1.0714. These are the key support and resistance levels for Friday.
According to my forecast, I'm expecting to see movement in the same pattern that occurred on the 8th of February. The 67th degree extends to 1.0637 from a maximum of 1.0714, which will act as a support for buyers. As bond yields rise, the euro will remain under pressure. As soon as bonds start to fall, the euro will rebound. This forecast relies on an analysis of cycles and patterns.
If you're wondering whether the euro might fall below 1.0641, the answer is that it might. The trend line was broken on the 7th of February, bond yields are rising and it's not a foregone conclusion that they will come back down. It is exactly because of this that I'm not sure whether the TR2 trend line will be broken through. Yesterday's break was a false one, so I've had to draw the line through the previous maximum of 1.0710.