EUR/USD Daily Forecast – Rising Treasury Yields Provide Support To U.S. Dollar

EUR/USD Video 17.02.21.

Euro Moves Lower Against U.S. Dollar

EUR/USD is currently trying to settle below the support level at 1.2080 while the U.S. dollar is gaining ground against a broad basket of currencies.

The U.S. Dollar Index gained upside momentum and is testing the nearest resistance level at the 50 EMA at 90.75. If this test is successful, the U.S. Dollar Index will move towards the next resistance level at 90.90 which will be bearish for EUR/USD. The yield of 30-year Treasuries has increased to 2.09% amid stimulus optimism which provides support to the American currency.

Yesterday, EU reported that Euro Area GDP declined by 0.6% in the fourth quarter while analysts expected that it would decrease by 0.7%

ZEW Economic Sentiment Index grew from 58.3 in January to 69.6 in February compared to analyst consensus of 57. The report has initially provided material support to euro, but the rapid increase in Treasury yields boosted the U.S. dollar.

Traders expect that U.S. inflation will rise due to the new round of stimulus and sell U.S. government bonds, pushing their yields higher. If U.S. government bond yields continue to rise, U.S. dollar may get additional support on the foreign exchange market.

Technical Analysis

EUR/USD declined below the 50 EMA at 1.2105 and is testing the next support level at 1.2080. If this test is successful, EUR/USD will head towards the next support level which is located at 1.2060.

A move below the support at 1.2060 will open the way to the test of the next support level at 1.2040. In case EUR/USD declines below this level, it will head towards the next support at 1.2000.

On the upside, the previous support at the 50 EMA at 1.2105 will likely serve as the first resistance level for EUR/USD. If EUR/USD gets above the resistance at 1.2105, it will head towards the next resistance at 1.2130. This resistance level has been tested many times in recent trading sessions, and EUR/USD did not manage to settle above 1.2130. In case EUR/USD settles above the resistance at 1.2130, it will head towards the next resistance at 1.2155.

For a look at all of today’s economic events, check out our economic calendar.