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EUR/USD: high risk of trend line being broken through


Trading on the euro on Monday closed in negative territory. The EUR/USD rate fell to 1.0592. The single currency depreciated on the back of a rise in US 10-year bond yields to 2.4519%.

The euro was also sensitive to news about Greece, who is unable to reach a deal with its international creditors. The Greek government need to gain approval in order to receive their next installment of financial assistance in their economic adjustment program, which amounts to 86 billion EUR.

Market expectations:

The economic calendar was bare on Monday. Today, traders will be awaiting the speech of Janet Yellen, Chair of the Federal Reserve System, as she addresses Congress, as well as the release of US inflation figures for January.

During the Asian session, the euro rose to 1.0612 owing to a fall in US bond yields. If yields continue to fall in the European session, the euro will strengthen against the dollar up to the moment of Yellen's speech. From a technical standpoint, a serious correction is due, so it's a good idea to lower your trading volume when it comes to short positions. The target for Tuesday is 1.0640 (45 degrees).

Day's news (GMT 3):

  • 10:00 Germany: preliminary GDP data (Q4), Consumer Price Index (Jan);
  • 11:15 Switzerland: Consumer Price Index (Jan), producer and import prices (Jan);
  • 12:30 UK: Retail Price Index (Jan), Producer Price Index - input (Jan), Consumer Price Index (Jan), DCLG House Price Index (Jan), Producer Price Index - output (Jan);
  • 13:00 Eurozone: preliminary GDP data (Q4), industrial production (Dec); Germany: ZEW survey - economic sentiment;
  • 14:00 USA: NFIB Business Optimism Index (Jan);
  • 16:30 USA: Producer Price Index (Jan);
  • 18:00 USA: Fed's Yellen speech;
  • 21:00 USA: Fed's Kaplan speech.

EURUSD rate on the hourly. Source: TradingView

Intraday forecast: low: 1.0588 (current in Asia), high: 1.0640, close: 1.0626.

The EUR/USD rate fell from the balance line to 1.0588. Now a smaller corrective movement is forming for 10-13th of February. The bears didn't make it to the 67th degree, but this is no real cause for concern. US 10-year bond yields reversed downwards, and the euro went upwards.

As bond yields fall to 2.4350%, the euro's strengthening will gather pace. For 10-year bonds, a double top looks to be forming on the weekly timeframe. Should the model be completed, the euro's trend line will be broken through. First of all, I'm expecting the euro rate to restore to 1.0621 or 1.0625. After a short correctional phase, the euro should continue to strengthen. In making my forecast for today, I'm mostly relying on the hourly timeframe of US 10-year bonds.

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