Bearish view
Top Regulated Brokers
Sell the EUR/USD pair and set a take-profit at 1.1200.
Add a stop-loss at 1.1425.
Timeline: 1-2 days.
Bullish view
Buy the EUR/USD pair and set a take-profit at 1.1425.
Add a stop-loss at 1.1200.
EUR/USD extended its decline, sliding to its lowest level since June as bond market stress in both the US and Europe intensified. The pair has now fallen for four consecutive weeks and sits 6.3% below its high for the year.
US and European Bond Yields are Soaring
The EUR/USD pair retreated as the US dollar gained momentum amid the soaring bond yields. The US Dollar Index (DXY) rose for the third consecutive day, reaching its highest level since July 27 this year.
A closer look at the bond market shows that the sell-off intensified, even as crude oil prices retreated. The ten-year yield jumped to 5.25%, while the 30-year surged to 5.59%, its highest level since 2002.
The same trend is happening in Europe, where yields in the top countries have continued to rise in the past few months. This surge is mostly because investors are concerned about rising public spending and the fact that economic growth has slowed.
US yields rose after the Federal Reserve delivered its first interest rate hike of the year last week, with officials hinting that they may need to hike again.
The EUR/USD pair also retreated after the US published mixed macro numbers. A report by the Conference Board showed that consumer confidence dipped to 81.9 this month from 88.6 in August. This retreat was worse than the expected 89.2 and is mostly because of the rising gasoline and diesel prices.
Another report showed that the JOLTS job openings dipped to 7.07 million, missing the estimated 7.23 million. On the positive side, the house price index rose 0.3% in August, up slightly from the expected 0.1%.
The remainder of this week will be important. Later today, the US will release the latest personal consumption expenditure (PCE) report, while ADP will publish the private sector payrolls numbers. The BLS will publish the September NFP report on Friday.
EUR/USD Technical Analysis
EUR/USD continued its strong downward trend this week as the dollar index surged. It has moved to 1.1335, an important level that aligns with the lowest point in June and July this year.
The pair has moved below the 50-day Exponential Moving Average (EMA), a sign that bears have prevailed. It is also below the Ichimoku cloud indicator.
The Relative Strength Index (RSI) has dropped to 24, its lowest level since March 13, a sign that it is highly oversold. Therefore, while the outlook is bearish, these oversold conditions suggest that it may have a brief rebound, potentially to 1.1400 and then resume the downtrend.